1

(Compiled as of November 8, 2012)

3rdCOMPARATIVE ANALYSIS OF ASIAN SECURITIES REGULAORS & SROs

AND

MARKET CHARACTERISTICS

(Data and information provided by participating organizations inthe 8th ASF Tokyo Round Table)

CONTENTS

I. Basic Organizational Features

I – 1. Organization Type, Statutory Basis

I –2. Number of Staff, Funding Source and Number of Member Firms

II. Regulatory Framework of the Securities Markets of Each Country

III. Regulation & Self Regulation

III – 1. Major Rule Making Functions of each Organization

III – 2. Qualification System for Market Professionals

III – 3. Securities Firms Inspection or Audit

III – 4. Disciplinary Action and Measures Against Misconducts

III – 5. Dispute Resolution System between Securities Firms and Customers

III – 6. Investor Education Activities

IV. Market Structures

IV – 1. Breakdown of Financial Assets held by Household Account

IV – 2. Share of Foreign Investors in the Stock Trading on the Exchange

IV – 3. Share of Foreign Investors in the Bond Trading on Exchange/OTC Market

IV –4. Settlement and Clearing Systems for Securities Transaction

IV –5. Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.)

IV –6. Share of On-line Trading

V. Challenges of Securities and Capital Market

V – 1. Major Recent Incidents and/or Challenges in Securities and Capital Markets as a whole

V – 2. Specific Challenges in Equity Market

V – 3. Specific Challenges in Bond Market

V – 4. Specific Measures introduced / Implemented for the Securities Market

V –5. Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

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I. Basic Organizational Features

I – 1. Organization Type, Statutory Basis

No. Country Name of Organization Organization Type Statutory Basis

1 Cambodia Securities and Exchange Commission of

Cambodia

SECC Government Regulator Established by Law on Issuance and

Trading of Non-Government Securities

2 China Securities Association of China SAC SRO &Industry

Association

Established by Securities Law of the

People‟s Republic of China

3 India Association of National Exchanges

Members of India

ANMI NPO registered under

Indian Companies Act

Spontaneously established

4 Indonesia Association of Indonesian Securities

Companies

APEI Industry Association Spontaneously established

5 Japan Japan Securities Dealers Association JSDA SRO &Industry

Association

Established pursuant to Financial

Instruments and Exchange Act

6 Kazakhstan Committee for the control and

supervision of the financial market and

financial organizations of the National

Bank of the Republic of Kazakhstan

FSC A part of the National

Bank of the Republic of

Kazakhstan

Established according to the Act of the

President of the Republic of Kazakhstan

№ 61 dd. 18.04.2011.

The Regulation on the Committee and

its organizational structure has been

approved by Board of Directors of the

National Bank of the Republic of

Kazakhstan, under the Act # 88, dd.

April 28, 2011.

On May 3, 2011, the Committee was

registered as a legal entity by the

Department of Justice of Almaty as a

state institution.

7 Laos Lao Securities and Exchange

Commission Office

SECO Government Regulator Established by Decree on Securities and

Securities Market

8 Malaysia Association of Stockbroking Companies

Malaysia

ASCM Industry Association Established by The Societies Act in

Malaysia

9 Mongolia Mongolian Association of Securities

Dealers

MASD Non-Government

Organization

Established by Law of Non-Government

Organization

10 Myanmar Central Bank of Myanmar CBM Government Regulator Central Bank of Myanmar Law, 1990

11 Pakistan Securities and Exchange Commission of

Pakistan

SECP An autonomous

regulatory body

established under law

which manages and

maintains its own fund

Set up in pursuance of the Securities and

Exchange Commission of Pakistan Act,

1997

12 Philippines Capital Markets Integrity Corporation CMIC SRO Established by Republic Act 8799,

otherwise known as the Securities

Regulation Code

13 Romania Romanian Stock Brokers Association RSBA SRO & Industry

Association

Established by GEO no.26/ 2000

regarding the associations and the

foundations

14 Sri Lanka Securities and Exchange Commission of

Sri Lanka

SEC Government Regulator Established by The Securities and

Exchange Commission of Sri Lanka ACT

No.36 of 1987 as Amended

15 Thailand1 The Thai Bond Market Association ThaiBMA SRO &Industry

Association

Established by Securities and Exchange

Act

16 Thailand2 Association of Thai Securities

Companies

ASCO Industry Association Established by or in accordance with

Securities and Exchange Act B.E. 2535

17 Turkey The Association of Capital Market

Intermediary Institutions of Turkey

TSPAKB SRO&Industry

Association

Established according to the Capital

Market Law. The Statute of the

Association became operational through

a Government Decree, dated January 8,

2001

18 UAE (DIFC) Dubai Financial Services Authority DFSA Government Regulator Established by Dubai Law No.9 of 2004

(as amended by Dubai Law No 7 of 2011)

19 Vietnam Vietnam Bond Market Association VBMA Industry Association Establishedaccording to Decision No.

830/QD-BNV dated May 22, 2009 issued

by Ministry of Home Affair

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I –2. Number of Staff, Funding Source and Number of Member Firms

No. Country Name of

Organization

No. of Full

Time Staff

Funding Source Number of Member Firms (by Business Category)

1 Cambodia SECC 80 Government Budget (As of September 25, 2012)

1 Cambodia Securities Exchange-CSX (Securities Market

Operator, Clearance and Settlement Facility Operator and

Securities Depository Operator)

13 Licensed Securities Firms (7 underwriters, 2 Dealers and

4 Brokers)

2Licensed Investment Advisor Firms.

3 Accredited Cash Settlement Agents

3 Registered Securities Transfer Agents

3 Registered Paying Agents

3 Registered Securities Registrars

5 Accredited Professional Accounting Firms

1 Accredited Valuation Company

7 Law Firms

2 China SAC 92 Membership Fee (As of June 30,2012)

111 securities companies

84 securities investment consulting institutions

6 credit rating institutions

1 asset management company

41 special members

3 India ANMI 2

(registere

d office)

+

α(regional

offices)

Membership Fee,

Special Contributions by

Members

About 880 Members on all India basis comprising of Market

Intermediaries Firms / Companies including foreign

institutional broking firms/companies.

4 Indonesia APEI 5 Membership Fee,

SRO Sponsorship,

Training Course Fee

Our members are only Securities Companies, which consist

of:

Stock Exchange Member: 114 (active brokerage house) with

the following breakdown:

Securities Houses 30

Underwriter Houses 12

Securities and Underwriting Houses 53

Securities and Fund Management Houses 2

Underwriter and Fund Management Houses 2

Securities, Underwriting and Fund Management Houses 15

5 Japan JSDA 334 Membership Fee,

Fees for Examination and

Training Course

(As of Sept.1,2012)

276 Regular Members consisting of securities companies

including foreign securities companies

217 Special Members consisting of banks, insurance

companies and other financial institutions

6 Kazakhstan FSC 275 Financed by the Budget of

the National Bank of the

Republic of Kazakhstan

As of the 1st July, 2012:

There are 110 legal entities licensed by the Committee to

conduct activity on the securities market, including second

tier banks (commercial banks), insurance companies,

insurance brokers, pension funds and organizations engaged

in certain types of banking operations;

There are 135 legal entities carrying out their professional

activity as a stock market operators, as follows:

- 66 broker/dealers;

- 10 registrars;

- 32 investment portfolio managers;

- 13 pension assets management organizations;

- 10 custodians;

- 2 transfer-agents;

- 1 stock exchange;

- 1 depository

7 Laos SECO 36 Government‟s Budget, SECO is a government regulator, does not have member.

At the present, there are 2 securities firms (both are member

of the Lao Securities Exchange (LSX)), one security exchange

– LSX, 3 audit companies (approved by SECO to provide

audit service related to securities business).

8 Malaysia ASCM 4 Membership Fee (As at 31 Aug 2012)

- 15 Securities Firms including 1 with foreign ownership.

- 14 Investment Banks.

9 Mongolia MASD 6 Membership Fee, (As of Sep.11,2012)

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There are 53 Members consisting of securities companies

which have more than 1000 professionals operating in the

securities market, licensed by the Financial Regulatory

Commission of Mongolia.

10 Myanmar CBM 1,127 Government‟s Budget 4 State-owned banks and 19 Private-owned banks

11 Pakistan SECP 560 A Fund has been established

under section 23 of the

Securities and Exchange

Commission of Pakistan Act,

1997 which comprises of (1)

grants from the Government

of Pakistan, (2) grants of

money and sums borrowed or

raised by the SECP for the

purposes of meeting its

obligations or discharging its

duties, (3) taxes, fees,

penalties or other charges

levied under the said Act,

and any other laws being

administered by the SECP,

and (4) all other sums or

property which may in any

manner become payable to or

vested in the SECP in

respect of its functions and

powers.

None

12 Philippines CMIC 20 regulatory fees from the

trading participants of the

Philippine Stock Exchange,

Inc.

CMIC functions as the independent audit, surveillance and

compliance unit of the Philippine Stock Exchange, Inc., which

has one hundred eighty-four (184) trading

participants-members (of this number, one hundred fifty-five

[155] are local members while twenty-nine [29] are foreign

members).

13 Romania RSBA 7 Membership fee &Fees for

trading courses and thematic

seminars

(As Of July 2012)

48 regular members

- 42 Regular Members – securities companies

- 6 Regular Members – banks

4 honorific members

Exponent personalities in the financial market

14 Sri Lanka SEC 76 CESS Levy*

(*A part of brokerage which

SEC is entitled to receive;

In case of equity -

Transactions up to Rs. 50

mil. – total brokerage 1.12%

of which SEC receives (as

Cess) - 0.072%

Transactions over Rs. 50 mil.

- minimum brokerage (floor)

- 0.200% of which SEC

receives 0.0450%),

Licensing/Registration/Appli

cation Fees, Seminar Income

The Colombo Stock Exchange (hereinafter referred to as the

“CSE”) is currently a mutual exchange and has 15 full

members and 13 trading members licensed to trade both

equity and debt securities, whilst 1 member is licensed to

trade in debt securities only. All 29 members are licensed by

the SEC to operate as stockbrokers and are corporate entities

and some are subsidiaries of large financial institutions.

15 Thailand1 ThaiBMA 45 Membership Fee,Fee from

Training, Training Course,

Information service fee

- 53 Ordinary Members consisted of 21 banks and 32

Securities which have debt trading license (Dealer)

- 2 Extraordinary Member which have inter-dealer

broker license (IDB)

16 Thailand2 ASCO 25 Membership Fee, Training

and Examination Fee

(as of Aug 27, 2012)

38 Regular Members consisting of Securities Companies

including Foreign Securities Companies

17 Turkey TSPAKB 26 Membership Fee& Training

fee

(As of September 2012)

- 101 brokerage firms,

- 1 derivatives brokerage firm

- 41 banks

18 UAE (DIFC) DFSA 130 Government Budget - 2 Authorised Market Institutions (1 securities and

derivatives exchange and clearing house NASDAQ Dubai

Limited, 1 commodities exchange Dubai Mercantile

Exchange Limited)

- 284 Authorised Firms

- 50 Ancillary Services Provider (including 16 Registered

Auditors)

- 1355 Authorised Individuals

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- 58 Recognised Members

- 8 Recognised Bodies

19 Vietnam VBMA 2 Membership Fee, VBMA has 55 members in which 33 Regular Members and 22

Associate Members, including

- 26 Banks,

- 7 Finance Companies,

- 14 Securities Companies,

- 1 Finance Leasing Companies,

- 3 Insurance Companies and

- 3 Law Firms.

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II. Regulatory Framework of the Securities Markets of Each Country

No. Country Name of

Organization

Major Laws, Rules or Practice in the Securities Markets of Each Country

1 Cambodia SECC -Law on Government Securities

- Law on The Issuance and Trading of Non-Government Securities

- Sub-decree on The Implementation of The Law on Issuance and Trading of Non-Government Securities

- Regulations and guidelines of the Securities and Exchange Commission of Cambodia (SECC‟s

regulations)

- Rule of the Cambodia Securities Exchange

Registration

Listing Rule

Membership Rule

Market Operation Rule

Clearing and Settlement Rule

Depository Rule

2 China SAC Laws:

Securities Law of the People‟s Republic of China

Regulation issued by ministries and commissions and normative documents:

1. In terms of securities issuance, The Administrative Measures for the Initial Public Offering and

Listing of Stocks, The Administrative interim Measures for the Initial Public Offering and Listing of

Stocks in Growth Enterprise Market，Measures for the Administration of Securities Issuance and

Underwriting, Administrative Regulations of Sponsoring Securities Issuance and Listing, The

Measures for the Issuance Examination Committee, Guidelines on Due Diligence Work of Sponsors,

etc.

2. In terms of listed companies governance, Measures for the Administration of the Equity Incentives of

Listed Companies (Trial Implementation), Administration of the Takeover of Listed Companies

Procedures, The Administrative Measure of Noticeable Asset Restructuring of Listing Companies,

Guidelines for the Articles of Incorporation of the Listed Companies, Rules for Shareholders Meetings

of Listed Companies and Administrative Measures on Information Disclosure by Listed Companies,

etc.

3. In terms of securities companies supervisory management, The Regulation on Supervision and

Administration of Securities Firms, Regulation on Risk Management of Securities Firms, Risk Control

Indices Management Measures on Securities Companies, Supervisory Measures on Qualification of

Directors, Supervisions and Senior Management Persons of Securities Companies, The Management

Measures on Margin Purchase and Short Sale Business of Securities Companies, and Guidelines for

Internal Control on Margin Purchase and Short Sale Business of Securities Companies, etc.

4. In terms of securities investment fund management, The Administrative Measure of Fund

Management Companies, Administrative Measures on Domestic Securities Investments of Qualified

Foreign Institutional Investors (QFII),Governance Norms on Securities Investment Fund

Companies(Trial), Notice on Related Problems of Setting Aside Risk Reserve Fund for Fund

Management Companies, Guiding Opinions on Management of Investment Administrators of Fund

Management Companies, etc.

5. In terms of securities registration and settlement, Administrative Measures on Securities Registration

and Settlement, Administrative Measures on Securities Settlement Risk Fund, etc.

6. 6. In terms of futures trading, Regulation on Trading Management of Futures, Management Measures

for Futures Brokerage Companies, Management Measures for Futures Exchange, The Management

Trial Measures on the Risk-based Supervision Index of Futures Companies, Trial Measures for the

Provision of Intermediary Services by Securities Companies to Futures Companies, Trail Measures on

Financial Futures Settlement Operation for Futures Companies, etc.

3 India ANMI Securities and Contracts (Regulations Act) (1956) (SCRA)

Securities and Exchange Board of India (SEBI) Regulations

Foreign Exchange Regulations

Indirect Tax

Income Tax

Companies Act

Other Other relevant applicable Acts.

4 Indonesia APEI - Under the Capital Market Law Number 8 Year 1995 (UUPM)-Capital Market and Financial Institutions

Supervisory Agency (Bapepam-LK)

- Indonesia Stock Exchange (IDX) Rules

- Indonesian Clearing and Guarantee Corporation (KPEI) Rules

- Indonesian Central Securities Depository (KSEI) Rules

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5 Japan JSDA Financial Instruments and Exchange Act (“FIEA”)

6 Kazakhstan FSA The Law “ On securities market of the Republic of Kazakhstan”;

The Law “On investment funds of the Republic of Kazakhstan”;

The Law “On pension provision of the Republic of Kazakhstan”;

and other legal acts established to regulate the activities on the stock market.

7 Laos SECO The government‟s Decree on Securities and Securities Exchange, No. 255/PM, dated May 24th 2010.

- Regulation on Organization and Operation of Securities Company

- Regulation on the Issuance of Stock to the Public

- Regulation on Exchange Supervision

- Regulation on Accounting and Auditing for related Securities Businesses

- Regulation on the Management of Foreign Investors in Securities Market in Lao PDR

- Regulation on Disclosure of Information

- Regulation on Securities Professional Supervision

8 Malaysia ASCM Capital Markets and Services Act 2007 (“CMSA”)

Bursa Malaysia Rules

In striving to build a market of quality and integrity, Bursa Malaysia is guided by the following regulatory

principles which are aimed at achieving regulatory goals and ensuring a consistent and cohesive approach

to its actions and decisions.

These principles are also embedded in the rules and regulatory framework of Bursa Malaysia. The

regulatory principles will ensure greater parity of regulatory actions across the different segments of

parties regulated and overall greater effectiveness in Regulation.

The principles are as follows:-

1. Clear and easily accessible rules and requirements

2. No more regulation than necessary

o Balance competing needs of regulation and business efficacy

o Ensure costs and burden of regulatory compliance are proportionate to the benefits

3. Principles-based approach where appropriate

o Move towards a principles-based approach to regulation, where appropriate but issue guidance

where necessary

4. Outcome focused

o Target outcomes through our regulatory actions or decisions rather than mere compliance with

rules

o Use discretion to modify or waive the rules, where the spirit of the rules can still be achieved, where

the business can be facilitated without harming other stakeholders or where the burden of

complying far outweighs the benefits

o Always be guided by our regulatory objectives and the current regulatory concern

o Consider the impact of our regulatory actions or decisions before and after taking each action or

decision

5. Innovative and competitive

o Facilitate innovation, for example, by avoiding unreasonable restrictions on regulatees

o Maintain the competitive position of Bursa Malaysia as an integrated exchange

6. Risk-based approach

o Emphasise on risk-based supervision rather than "one-size fits all" regulation

o Facilitate early detection of problems, issues and trends, enabling prompt pre-emptive actions

7. Values-based approach

o Enforce the rules without fear or favour

o Act professionally with integrity and fairness

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o Exercise our powers and discretion consistently whilst also considering the particular facts of each

case and different points of view

o Act swiftly, in a proactive manner

8. Transparency

o Make our regulatory approaches and processes more transparent

o Communicate clearly and effectively about what we do

9. Benchmarked and globally collaborative

o Observe and benchmark to international standards and best practices

o Create and maintain close co-ordination among both domestic and foreign regulators

10. Consultative approach

o Adopt a consultative approach and actively seek feedback from industry participants, other

stakeholders and the public

o Interact and leverage on relationships with stakeholders

9 Mongolia MASD Securities Market Law of Mongolia

10 Myanmar CBM The major law will be Security Exchange Law and it will be enacted in very soon.

11 Pakistan SECP Statutes administered by the SECP:

Securities and Exchange Ordinance, 1969

Companies (Appointment of Legal Advisors) Act 1974

Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980

Companies Ordinance, 1984

Central Depositories Act, 1997

Securities and Exchange Commission of Pakistan Act, 1997

Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002

Insurance Ordinance, 2000

Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012

Anti Money Laundering Act, 2010

Rules administered by the SECP:

Securities (Leveraged Markets and Pledging) Rules, 2011

Anti Money Laundering Rules, 2008

Takaful Rules,2005

Clearing Houses (Regulation and Registration) Rules, 2005

Voluntary Pension System Rules, 2005

Commodity Exchange and Futures Contract Rules, 2005

Single Member Private Limited Companies Rules, 2003

The SECP (Appellate Bench Procedure) Rules, 2003

NBFC (Establishment and Regulation) Rules, 2003

Insurance Rules, 2002

SEC (Insurance) Rules, 2002

Balloters Transfer Agents and Underwriters Rules, 2001

Brokers and Agents Registration Rules, 2001

Public Companies (Employees Stock Option Scheme) Rules, 2001

Stock Exchange Members (Inspection of Books and Record) Rules, 2001

Members' Agents and Traders (Eligibility Standards) Rules, 2001

Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000

Companies (Asset-Backed Securitization) Rules, 1999

The Companies (Buy-Back of Shares) Rules, 1999

The Companies (Rehabilitation of Sick Industrial Units) Rules, 1999

The Companies (Audit of Cost Accounts) Rules, 1998

The Companies (Court) Rules, 1997

Central Depository Companies (Establishment and Regulation) Rules, 1996

Companies (Issue of Capital) Rules, 1996

The Employees‟ Provident Fund (Investment in Listed Securities) Rules, 1996

Credit Rating Companies Rules, 1995

Companies (Management by Administrator) Rules, 1993

Companies (Management by Administrator) Rules, 1993

Companies (Invitation and Acceptance of Deposits) Rules, 1987

The Companies (General Provisions And Forms) Rules, 1985

Modaraba Companies and Modaraba Rules, 1981

The Companies (Appointment of Legal Advisers) Rules, 1975

Companies (Appointment of Trustees) Rules, 1973

Companies Profits (Workers Participation) Rules, 1971

Securities and Exchange Rules, 1971

In addition to the above, the SECP also administers a number of Regulations for the corporate sector and

capital market.

12 Philippines CMIC The applicable major laws and rules in the Philippine regulatory securities market are as follows:

a. Republic Act 8799, otherwise known as the Securities Regulation Code, and the Amended

9

Implementing Rules and Regulations of the Securities Regulation Code;

b. Securities and Exchange Commission‟s Rules of Procedure, Memorandum Circulars,

and other issuances;

c. The Capital Markets Integrity Corporation Rules; and

d. Rules of the Philippine Stock Exchange, including, but not limited to:

• The Revised Trading Rules and its Implementing Guidelines

• Trading, Clearing and Settlement Rules

• Revised Listing and Disclosure Rules

• Rules Governing Trading Rights and Trading Participants

• The Philippine Stock Exchange‟s Amended Articles of Incorporation

13 Romania RSBA - Law No.297/2004 - regarding the capital market

14 Sri Lanka SEC SEC Act No. 36 of 1987 as amended, SEC 2001 Rules, Takeovers & Mergers Code, Unit Trust Code,

SEC Directives, Draft rules for Market Intermediaries

Colombo Stock Exchange Rules, Circulars and Procedures (Stockbroker Rules, Listing Rules, ATS

Rules & Regulations, CDS Rules, DEX Rules, procedures for Capital Reorganisations by listed

companies)

15 Thailand1 ThaiBMA -Securities and Exchange Act B.E. 2535 (the SEC‟s Act)

-Regulation and Notifications of the Securities and Exchange Commission (SEC‟s regulation)

-Regulation and Notifications of the Thai Bond Market Association (ThaiBMA‟s regulation)

16 Thailand2 ASCO Securities and Exchange Act B.E 2535/ in the process of setting up SRO (expected to implement with in

next year)

17 Turkey TSPAKB -Capital Market Law (CML)

-Capital Markets Board‟s (CMB) Communiqués

-Decree Law on Securities Exchanges

-Istanbul Stock Exchange (ISE) and Turkish Derivatives Exchange‟s (TurkDEX) rulebooks

18 UAE (DIFC) DFSA Primary Legislation: Federal Laws, Dubai Law, DIFC Law

-Federal Law No 8 of 2004: Regarding The Financial Free Zones in the United Arab Emirates (the

Financial Free Zone Law)

-Federal Decree No 35 of 2004 specifically established the DIFC as a Financial Free Zone in the Emirate of

Dubai

-Dubai Law No 9 of 2004, '„The Law Establishing the Dubai International Financial Centre‟ is a Dubai

Law that recognises the financial and administrative independence of the DIFC. It establishes the

various bodies, including the DFSA, that are necessary for the DIFC‟s day-to-day operation.

-Dubai International Financial Centre (DIFC) laws administered by the DFSA governing Financial

Services which are the Regulatory Law 2004, Markets Law 2004, Law Regulating Islamic Financial

Business 2004, Trust Law 2005, Collective Investment Law 2006, Investment Trust law 2006.

-DIFC laws administered by the DIFC Authority such as the Companies Law, Insolvency Law, Companies

Law, Contract Law, Arbitration Law, Insolvency Law, Data Protection Law. DIFC laws are enacted by

the Ruler of Dubai and apply only in the DIFC.

Secondary Legislation

The DFSA Rules are subsidiary legislation made under the laws administered by the DFSA. The

Rulebook is made up of topic-area modules which specify their scope and the audience to whom they apply,

and there are a total of 18 modules. All DFSA rules are available on the DFSA website www.dfsa.ae

19 Vietnam VBMA -Securities Law issued on 29/06/2006

-Credit Institutions Law issued on 26/06/2010

-Decree No.01/2011/ND-CP dated 05/01/2011 on government bond issuance

-Decree No. 90/2011/ND-CP dated 14/10/2011 on corporate bond issuance

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III. Regulation & SelfRegulation

III –1. Major Rule Making Functions of Each Organization

No. Country Name of

Organization

Major Rule Making Functions

1 Cambodia SECC - Law on Trading and Issuance of Non-Government Securities, the responsibility of Securities and

Exchange Commission of Cambodia includes the following :

1. To regulate and supervise securities market in the Kingdom of Cambodia.

2. To enforce policy with respect to securities markets.

3. To formulate conditions for granting approval to the operators of a securities market, clearance

and settlement facility, and securities depository

4. To formulate conditions for granting license to securities companies and securities company

representatives

5. To promote and encourage compliance with requirements of this law.

6. To act as an appeal body in respect of decisions made by approved entities affect members,

participants or investors,

7. To consult with any qualified person for the purpose of formulating policies for the development of

a securities market in the Kingdom of Cambodia.

8. To fulfill other duties prescribed by sub-decree.

- Anukret (Sub-decree) on the Conduct and Organization of the Securities and Exchange Commission of

Cambodia

2 China SAC According to the provision of Securities Law of the people‟s Republic of China, the responsibilities of the

Securities Association of China (SAC) include formulating rules and regulations that SAC members must

abide by, supervising and examining members‟ action and the members who break the law, regulation or

SAC rules will be subject to discipline action.

SAC Regulation stipulates that SAC formulates self-regulatory rules, qualification standards for

practitioners and business criteria and provides services and management to SAC members according to

administrative regulation and CSRC regulatory documents, etc. Furthermore, the Regulation illustrates

that SAC could promote Members‟ establishment of information technology and information security,

organize to develop industry technical standards and guidelines coordinating with industry development.

3 India ANMI Our organizations have rules governing the conduct of members as a trade organization. We offer

guidance on regulations issued by regulatory bodies as above. Our rule making functions do not cover the

rules and regulations governing the capital market.

4 Indonesia APEI APEI is not a Self-Regulatory Organization (SRO). APEI functions are a liaison between our members and

regulatory authorities. The industry is regulated by the Capital Market Supervisory Agency & Financial

Institution(Bapepam-LK) and SRO (IDX, KSEI, KPEI)

5 Japan JSDA JSDA makes and enforces a wide range of self-regulatory rules covering the securities business in Japan

that control the conduct of its member firms.

6 Kazakhstan FSC According to the Law “On the state regulation, control and supervision over the financial market and

financial organizations” the main functions of the Committee are as follows:

- to issue and recall permissions to open (establish) financial organizations, arrange reorganization and

liquidation, approve new branches opening, as well as set the order of issuance of such permissions and

consents;

- give or deny consent to elect/appoint candidates for managing positions in financial organizations, as

well as set the order of issuance or denial of such consent;

- set the order of issuance, suspension and deprivation of licenses to perform professional activity on the

financial market, in cases stipulated by the legislation on licensing of the Republic of Kazakhstan; issue,

suspend, and deprive of such licenses;

- issue regulations mandatory for financial institutions, consumers, financial services, other legal entities

and individuals on the territory of the Republic of Kazakhstan;

- approve prudential standards and other mandatory standards and limits for financial institutions,

including consolidated basis;

- to approve the internal procedures of the banks, bank holding companies and banking conglomerates

focused on meeting the requirements of the authorized body considering the risks they are taking;

- implement the reporting regime (except for the financial statements) of financial institutions and their

affiliates;

- participate on the general meeting of shareholders of financial institutions, bank and insurance holding

companies;

- examine and revise the activities of financial institutions and their affiliates in the cases and within legal

issues of the Republic of Kazakhstan, including the involvement of the audit firms;

- examine and revise the legal entities applying for the license to operate on the financial market, in the

cases and within legal issues of the Republic of Kazakhstan;

- set the condition of enforcement measures and sanctions for the financial organizations, majorities of

financial organizations, banking and insurance holding companies, banking conglomerates and

insurance groups within the law of the Republic of Kazakhstan.

- in coordination with the Government of the Republic of Kazakhstan able to take decision on mandatory

buyout of shares of financial institutions within the law of the Republic of Kazakhstan.

- Other functions stipulated by the law of the Republic of Kazakhstan

7 Laos SECO SECO formulates securities-related rules and regulations covering the securities issuance, securities

exchange and securities business in the Lao PDR that manage and supervise operations of the issuing

11

companies, securities companies, and the securities exchange in a stable, transparent, fair and efficient

manner.

8 Malaysia ASCM ASCM is not a self-regulatory organisation. The industry is regulated by the Securities Commission and

Bursa Malaysia which acts as both an exchange and frontline regulator of the Malaysian capital market.

9 Mongolia MASD -To protect rights and interests of its members and their customers under the Law and relevant

regulations of Mongolia;

-To provide professional consultancy with relevant law and regulations to the professional participants;

-To submit its proposal to develop and implement the securities legislation and policies to the authorized

organizations;

-To make professional ethical code which its members should be following publicly.

-To organize training and seminars for its members‟ professionals and the public, and make journal and

news;

-To share information, study experience, and develop co-operation with the same organizations or

associations;

-To organize professional training to get a license in direction with the Financial Regulatory Commission.

10 Myanmar CBM The Central Bank of Myanmar takes over the monetary stability and financial sector stability of the

country.

11 Pakistan SECP The SECP is mandated with the responsibility to facilitate development of modern and efficient corporate

sector and capital market, based on sound regulatory principles that provide impetus for high economic

growth.

Under Section 20 of the SECP Act, 1997, SECP is responsible for the performance of the following

functions:

(a) regulating the issue of securities;

(b) regulating the business in Stock Exchanges [Commodity Exchange] and any other securities

markets;

(c) supervising and monitoring the activities of any central depository and Stock Exchange clearing

house;

(d) registering and regulating the working of stock brokers, sub-brokers, share transfer agents,

bankers to an issue, trustees of trust deeds, registrars to an issue, underwriters, portfolio managers,

investment advisers and such other intermediaries who may be associated with the securities

markets in any manner;

(e) proposing regulations for the registration and regulating the working of collective investment

schemes, including unit trust schemes;

(f) promoting and regulating self-regulatory organizations including securities industry and related

organizations such as Stock Exchanges and associations of mutual funds, leasing companies and

other Non Bank Financial Institutions;

(g) prohibiting fraudulent and unfair trade practices relating to securities markets;

(h) promoting investors‟ education and training of intermediaries of securities markets;

(i) hearing and deciding investor complaints against persons involved in brokerage business for

violations of securities laws, rules, regulations, directives, codes, etc;

(j) regulating substantial acquisition of shares and the merger and take-over of companies;

(k) regulating professionals who provide services within the financial services market;

(l) considering and suggesting reforms of the law relating to companies and bodies corporate,

securities markets, including changes to the constitution, rules and regulations of companies and

bodies corporate, Stock Exchanges or clearing houses;

(m) encouraging the organized development of the capital market and the corporate sector in

Pakistan;

(n) ensuring and monitoring compliance by insurers, insurance surveyors and insurance

intermediaries of all laws, rules and regulations pertaining to insurance for the time being in force;

(o) regulating professional organizations connected with the insurance business;

(p) promoting and regulating development of Private Pension Schemes and Funds

Sectors under SECP‟s regulatory ambit include:

Corporate Sector

Capital Market

Insurance Sector

Non-Banking Financial Sector (Investment Banks, Leasing, Modarbas, Voluntary Pension

Schemes, Mutual Funds)

The SECP was given regulation-making powers by Federal Government through Finance Act 2007.

Subsequently, various regulations have been developed under various statutes. The SECP has also issued

guidelines for areas like; Bancassurance, internet trading, issue of Commercial Paper/TFCs/Prospectus,

compliance of AML requirements for market intermediaries, etc.

12 Philippines CMIC CMIC functions as the independent audit, surveillance and compliance unit of the Philippine Stock

Exchange, Inc. It reinforces the confidence of the investing public through the adoption, enforcement,

implementation and interpretation of rules, guidelines and the Securities Laws applicable to the

operations and dealings of trading participants and other market participants of the Philippine Stock

Exchange, and acts as a self-regulatory organization under the laws of the Philippines.

CMIC shall have the jurisdiction to investigate and resolve, or shall decide in the first instance all cases

involving: (1) all violations of the Securities Laws or the CMIC Rules by trading participants, and; (2)

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trading-related irregularities and unusual trading activities involving issuers. Thus, a trading participant

shall comply or cause compliance with any order of CMIC for a trading participant to (a) attend, (b)

provide information, and/or (c) produce records and other documents under the control of the trading

participant at any investigation or other proceedings of CMIC in connection with (a) any matter within

CMIC‟s jurisdiction to investigate and resolve under the CMIC Rules or (b) CMIC‟s enforcement of the

Securities Laws.

13 Romania RSBA The main purpose of the Stock Brokers` Association is to promote a favourable environment for the

development of the capital market and to play a decisive role in the elaboration of economic, financial and

fiscal policies likely to have an impact on the capital market.

Another purpose is to develop, manage and promote conduct and professional ethics standards among its

members.

In order to enable the implication of the brokers' community in the process of elaborating macroeconomic

policies, the Stock Brokers' Association has become a strong voice in the process, by assuming the role of a

consultative organism for the principal law-makers: Romanian National Securities Commission, Ministry

of Finance, Government and Parliament.

14 Sri Lanka SEC As Regulator of the capital market of Sri Lanka, the SEC formulates and enforces rules and regulations to

maintain a securities market that is fair, efficient, orderly and transparent.

15 Thailand1 ThaiBMA ThaiBMA plays major roles as an SRO and information center for Thai bond market. ThaiBMA issues

rules and regulations for bond trading which include ethics and code of conduct for our member and

traders. Also, we perform market with monitoring and surveillance, where all bond transactions are

required to report to ThaiBMA within 30 minutes after execution.

16 Thailand2 ASCO By ASCO‟s BOED and regular member under SEC announcement and Securities and Exchange Act B.E

2535.

17 Turkey TSPAKB - Establish professional rules and regulations,

- Set safety measures aimed at preventing unfair competition,

- Assist in the resolution of disputes arising from off-exchange transactions among its members or

between its members and investors,

- Determine the principles on commissions and fees charged by its members and propose these to the

Capital Market Board,

- Evaluate complaints against its members and inform the Board on the results,

- Impose disciplinary action against the law and the Statute.

18 UAE (DIFC) DFSA The Rules made by the DFSA under the administered laws comprehensively cover the full range of

financial and related activities undertaken in or from the DIFC. The regulatory mandate covers asset

management, banking and credit services, securities, collective investment funds, custody and trust

services, commodities futures trading, Islamic finance, insurance, an international equities exchange and

an international commodities derivatives exchange.

19 Vietnam VBMA VBMA performs the following function as an association of debt market professional in Vietnam

- A high-standard debt market professionals community in Vietnam

- A market modernization champion and driver

- A collective market information source

- A policy dialogue interlocutor for policymakers and regulators

- A training center for the market players

VBMA has introduced to the market a written code of conduct applicable to VBMA members and their

employees with regard to debt market transactions.

The written mark convention applicable to debt market transactions among VBMA members and with

their transaction counterparts was also produced and will be introduced to the market soon.

A model back-office manual for debt market transactions that was designed to be used for reference by

VBMA members when they attempt to standardize and improve their back-office operations for debt

market transactions. VBMA has selected 4 members for pilot implementation this Back Office Manual at

their organizations.

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III –2. Qualification System for Market Professionals

No. Country Name of

Organization

Qualification Systems for Market Professionals

1 Cambodia SECC According to the Prakas (Regulation) on Licensing of Securities Firms and Securities Representative, the

Chef Executive Officer (CEO), Head of Securities Representative, Head of Operation, Compliance Officer

and Other Senior Officers of securities firms shall participates in the training program and/or pass an

examination set by the SECC to engage in the securities business activities in the Kingdom of Cambodia.

The training and examination is mainly focused on legal aspect only (SECC‟s regulation, CSX‟s rules, Law

on Commercial Enterprise, Law on Investment, etc.) and conducted with paper based and multiple choice

questions (MCQ).

So far, there are 162 participants attended the training course and took the examination organized by the

SECC

2 China SAC -Formulated by CSRC, The Measures for Securities Practitioners Qualification Management stipulates

that professional persons undertaking securities business in securities companies, fund management

companies, fund custodian and sales institutions, securities investment consulting institution and

securities credit rating institutions must obtain practice qualifications and practitioners‟ certificates.

Furthermore, SAC is responsible for organizing practitioners‟ qualification examination, issuing

practitioners‟ certificates, and launching registration, etc.

-Formulated by SAC, Implement Detailed Rules for Securities Practitioners Qualification Management

(Trial) stipulates that SAC checks up practitioners‟ certificates every two years, examines and

investigates practitioners, and the rule violation practitioners will be subject to take disciplinary

punishment and will be logged in the integrity web system making for securities practitioners.

-Formulated by SAC, „Code of Conduct for Securities Practitioners‟ specifies the demand for Securities

Practitioners. Securities Practitioners in their practice should maintain legitimate rights of customers

and other related parties, be honesty, diligent; provide professional services to customers in accordance

with business norms and practice standards; provide education for customers on securities investment,

reveal the investment risk to clients; take part in the subsequent vocational training provided by SAC.

3 India ANMI Under the SEBI and Exchange regulations, India have adopted a registration systems where at least two

Designated Director of the Securities Companies, should have a minimum of 2 years experience in an

activity related to dealing in securities. E.g. as a portfolio manager, or as investment consultant, or as a

merchant banker, or in financial services or Treasury, Broker, Sub Broker, Authorized Agent or as a

Authorized Person to a member of a recognized stock exchange, Dealer, Jobber, Market Maker, or in any

other manner in dealing in securities or clearing and settlement thereof.

The exchange requires member‟s firms‟ officers and dealers to pass suitable examinations certifying their

capability to function in the capacity in which they are employed. They require obtaining the National

Institute of Securities Market (NISM) and National Certificate for Financial Markets (NCFM). This is a

prerequisite to employment in any securities company to ensure that they have adequate skills and

knowledge. The NCFM certificate is available in all operational subjects.

The National Stock Exchange, Bombay Stock Exchange as well as MCX Stock Exchange conduct their own

examinations for the Equities Market, Futures & Options Market and the Currency Market. Here is the

link to NSE‟s site introducing you to NCFM:

http://www.nseindia.com/content/ncfm/ncfm_introduction.htm

In addition, NSE also offers a host of other examinations (including for those who want to become

Insurance Agents). Here is the link giving a list of their modules:

http://www.nseindia.com/content/ncfm/ncfm_modules.htm

A few years ago SEBI formed an Institute called NISM, with the objective of making it, over time, the sole

body conducting examinations for the Capital Markets. It has become compulsory now. Here is the link to

the NISM website:

http://www.nism.ac.in/

The only outsourcing done by them is for conducting of the examinations, where they get professional

entities (largely IT training institutes, since they have the required set-up) to conduct the examinations

for them. The test material and all other back end work is handled by the respective entities.

4 Indonesia APEI 1. Examination for licensing

Under the Capital Market Supervisory Agency Rules, we differentiate Securities Company and Individual

licenses. There are three different licenses in a Security House may hold, they are: Broker-Dealer,

Underwriter and Investment Manager Representative licenses. As of individuals, there are four types of

licenses a professional may hold, they are: a Representative of Mutual Fund Sales Agent License, Broker

Dealer License, Underwriter License & Fund Manager License. Each of these individual licenses can be

obtained by taking and passing the intended test provided by the Capital Market Professional Standard

Committee (PSP).

The Capital Market Professional Standards Committee (PSP) conducted a test in writing for all licenses

that are held three times in a year and open to the public, the examinee must meet the minimum value to

obtain a certificate of graduation and then the certificate can be effectively used after registration in the

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Capital Market Supervisory Agency (Bapepam-LK).

Broker dealer license shall be held by the employees of securities firms that act as a sales or dealer as well

as other license shall be held by employees who handle the related fields, so hopefully the employee will

have sufficient knowledge and expertise in handling client assets.

2. Training and workshop

The association in cooperation with the regulators and SROs regularly organizes workshops or training

related to the implementation of new regulations or to enhance participants' understanding related to its

function in the securities company, in general training or workshops related to the compliance and

enhancement of back office function.

Regulation has required the company directors to follow the continuing education in order to get better

understanding about the development and implementation of existing legislation and currently the

implementation is coordinated by the association in cooperation with the regulators and the SROs

5 Japan JSDA 1. Qualification Examinations

Under the FIEA, Japan has adopted a registration system for sales representatives, and unqualified

people are excluded from the sales activities of securities companies, etc. For this reason, and being

delegated by the FIEA, JSDA requires member firms‟ officers and employees to obtain qualification as a

Sales Representative, which is a prerequisite for being engaged in the securities business in Japan.

This rule ensures that market professionals have adequate skills and knowledge.

For this purpose, JSDA holds the qualification examinations for Class-1 Sales Representative and

Class-2 Sales Representative for employees of regular members involved in securities business operations.

Class-1 Examination became open to the public starting from January 2012, in addition to Class-2 Sales

Representative which has been open to the public since September 2004.

It also holds the qualification examinations for Special Member‟s Class-1 Sales Representative, Special

Member‟s Class-2 Sales Representative and Special Member‟s Class-4 Sales Representative.

In addition, JSDA introduced a Sales Manager and Internal Administration system in April 1992

whereby member firms must appoint a “Sales Manager” and an “Internal Administrator” for each sales

unit. To become a “Sales Manager” or an “Internal Administrator”, candidates must pass the Internal

Administrator examination (or Special Member‟s Internal Administrator in case of officers and employees

of special members).

JSDA has been offering computerized examinations since April 2002, which enable candidates to take

those examinations on any business day. The qualification examinations for regular members are

conducted in English as well.

The number of the examinees and successful applicants for each examination in fiscal 2011 is shown in

the following table.

Examination Examinees Successful Applicants

Class-1 Sales Representative 60,076 25,859

Class-2 Sales Representative 40,010 22,888

Internal Administrator 21,239 18,275

Special Member's Class-1 Sales Representative 13,384 4,480

Special Member's Class-2 Sales Representative 26,785 10,794

Special Member's Class-4 Sales Representative 600 230

Special Member's Internal Administrator 4,297 3,783

2. Training Courses for Members

Based on a training program drawn up annually, JSDA provides training courses for executive officers

and employees of member firms. JSDA flexibly conducts training courses other than those included in the

program in response to amendments of laws and institutional reform.

Total of 5,039 participants attended these courses during the fiscal year 2011.

To contribute to strengthen the compliance system and to enhance internal training in member firms,

JSDA edited and distributed a collection of rulebooks on laws and regulations to be used as reference

material in internal training courses. In addition, JSDA provided summaries and training materials on

compliance-related themes from among its training themes for the fiscal year. Moreover, JSDA dispatched

or introduced JSDA‟s executive officers and employees as lecturers at a total of 36 in-house training

sessions of member companies during the fiscal year 2011.

Training Courses in Fiscal 2011

1. Seminar for company representatives

2. Training for executives

3. Training for internal administration supervisors

4. Training for internal administration assistant supervisors

5. Training for internal administrators

6. Training for sales managers

7. Training for qualification renewal of sales representatives

8. Basic Compliance course

9. Compliance practice course

10. Securities business seminar

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11. Compliance seminar for sales staff

12. Risk management seminar

13. Corporate ethics seminar

6 Kazakhstan FSC In order to obtain a licence an applicant must comply with the following qualification requirements:

- availability of a business plan, which describes the purpose of organization of the applicant, guidelines of

activities and the market segment in which the applicant plan to operate, types of services, marketing

plan, risks related to professional activities of the applicant and methods to reduce such, financial

perspectives (estimated balance-sheet, income statement for the first three financial (operating) years),

a staffing plan;

- availability of programmes, computers and other equipment required for activities in the securities

market in accordance with the regulatory legal acts of the authorised body;

- compliance of the organisational structure with the requirements established byLaw on the security

market of the Republic of Kazakhstan and regulatory legal acts of the authorised body;presence of

regulations concerning the internal audit of the applicant.

[Until 2006, there used to be a requirement for individuals which were employees of brokers-dealers‟

companies. They needed to pass qualification examinations. Instead of these requirements were approved

requirements for the top management of the security firms such as:

- a university degree,

- relevant work experience in financial market,

- had a precedent of managing a member-firm that was recalled its license or liquidated

- Others]

7 Lao SECO As specified in the Decree on Securities and Securities Exchange, individual wanting to be a securities

practitioner shall be employed by a securities company and receive a securities practitioner certificate.

SECO grants Securities Practitioner Certificate to individuals who passed a securities-related

examination organized by SECO.

From 2009-2010, SECO in co-organizing with the Stock Exchange of Thailand held the training courses

which has been opening to the public and divided into 2 levels as the Certificate of Modern Investment

Professional 1 and 2 (hereinafter referred to as CMIP 1 & 2). However, at the present the Lao Securities

Exchange is in charge of organizing the training courses and the examination instead of SECO.

An individual will be qualified for being a broker if he/she passed the CMIP 1 and will be qualified for being

a financial advisor and analyst if he/she passed the CMIP 2.

8 Malaysia ASCM In Malaysia, the CMSA requires market professionals to hold Capital Markets Services Representative‟s

License (“CMSRL”) in order to deal in securities and futures trading. In attaining their licenses, the

market professionals are required to pass licensing examinations set by the Securities Commission which

acts as the regulator and enforcer of the CMSA.

9 Mongolia FRC Securities Market Law of Mongolia prescribes as follows;

19.1. Professional participants in the securities markets are Stock Exchange, Trading center of securities

dealers, Securities settlement and depository organizations, Mutual and Investment funds, Brokers,

Dealers, Underwriters, Investment management and Investment Advisors.

20.1. The Commission (as Financial Regulatory Commission or “FRC”) shall grant special licenses to

professional participant in the securities markets specified in provision 19.1 of this Law.

20.2. The Commission can grant special licenses to The Stock Exchange, Clearing and Settlement and Central

Depository Systems and to securities dealers centers separately or it can grant a license for combined

activities.

20.3. The Commission shall grant a special license to commercial banks in consultation with the Bank of

Mongolia and grant a special license to insurance agencies and pension funds in consultation with central

government agency in charge of financial and social affairs.

20.4. In order for applying to get a special licenses specified in the provision 20.1 of this Law an applicant

shall attach the following documents to its application other than those provided by the Law on special

licenses:

20.4 1. Verification of meeting the minimum capital requirements;

20.4.2. Certified copy of the Company Charter;

20.4.3. Business plan that contains an estimation of planned profits for first three years;

20.4.4. Detailed introduction on consistent activities of securities clearing depository organizations with

the networks of the Stock exchange or with the networks of center for trading of securities dealers;

20.4.5.Reference which verifies that the applicant is financially solvent and with non-past due loans;

20.4.6.Risk management plan;

20.4.7. Reference notes on professional and experienced personal employed;

20.4.8.Notes that certifies the place of business, equipment necessary for participating in securities

trading.

10 Myanmar CBM After enacting the Security Exchange Law, the Myanmar Security Exchange Commission will be

established and it will lead the implementation plan for qualification system for Market professionals.

11 Pakistan SECP The Institute of Capital Markets (ICM) has been mandated to conduct licensing certification examinations

for different segments of the capital market and to develop skilled professionals for this market. Going

forward, partnership will be formed between the SECP and the ICM for undertaking education and

training requirements for existing and potential market participants, under which the ICM will be

involved in various educational activities and will also be engaged in the capacity development of resource

persons for the purpose of conducting such activities.

16

Further, all Asset Management Companies and Pension Fund Managers were required to have at least 2

persons or 20% of their employees (whichever is higher) undertaking activities related to sale of collective

investment schemes or pension funds, who shall obtain certification for Mutual Funds Sales Agents from

ICM latest by June 30, 2011. Any new professional entrants appointed by the ACMs/PFMs are required to

have the ICM certification for Mutual Funds Sales Agents within one year of his/her employment with the

AMC/PFM.

Further, all brokers of the stock and commodity exchanges registered with the SECP are required to

nominate a Compliance Officer from amongst their employees who shall be responsible to ensure effective

implementation and compliance with relevant regulatory framework.

Also, for all personnel undertaking the functions of brokerage, trading, sales agents and professionals

providing buying/selling advice to clients, certification from ICM has been made mandatory as follows:

At least 2 persons or 20% of the employees (whichever is higher) shall obtain relevant

certification by June 30, 2011. (However, existing employees above the age of 35 and having

relevant experience of at least five years are exempt from this condition.)

Any new professional entrants in the capital market shall be required to have the ICM

certification within one year of his/her employment with the broker.

12 Philippines CMIC Compliance Officer / Associated Person - the (Philippine) Securities and Exchange Commission

administers a certification seminar and exam (Association Person Certification Exam) for those who want

to be compliance officers/associated persons. Only licensed compliance officers/associated persons are

allowed to occupy a compliance function in a brokerage house. Further, each trading participant/broker is

required by the (Philippine) Securities and Exchange Commission to have at least one compliance

officers/associated persons. Failure to comply with the preceding requirement would result to cancellation

of the broker-dealer license. The Philippine Stock Exchange assists trading participants in their

compliance function by conducting seminars to keep them abreast with new rules and regulations.

Salesman/ Trader - The (Philippine) Securities and Exchange Commission administers the licensing of

salesmen. Accordingly, a candidate must pass the Securities Certification Exam, or SRCE, and the PAM

Certification Seminar, which is conducted by the Philippine Stock Exchange, for the salesman to validly

trade in the Exchange.

13 Romania RSBA In Romania, participants to the capital market can only be the investment firms and asset management

companies. Therefore, the employees of the above mentioned companies must obtain a qualification

recognized by the Romanian National Securities Commission prior to being employed in the company.

For that purpose, the Stock Brokers` Association has been organizing training courses which are ending

with an examination counting for obtaining the authorisation since 2007. The main courses for obtaining

the required authorization are:

- brokers

- compliance officers

- investment consultants.

Last year, almost 200 persons have attended these courses, 74% of them applying for the brokers‟

specialization.

In 2010, The Stock Brokers` Association began organizing courses mandatory for the continuous

professional training – compulsory by internal regulation. Last year, the Association started a new

program in which well-known lectors delivered 11 types of courses for over 700 persons. These courses

covered all the aspects in the financial domain such as: Sales Planning, Identifying And Finding Solutions

To customer needs, Negotiation Techniques, Financial Management And Risk Management, Business

Plan, Legal And Accounting Issues Encountered when Opening A Business, Human Resources

Management, Communication, Leadership, Financial Instruments Used In The United Europe And The

Conditions Of Implementing to the Romanian Market, European Legislation. In the first half of this year,

more than 900 employees attended the courses.

The Stock Brokers` Association has not neglected the globalization process taking place in the last years.

There for, in March this year, an agreement was signed with London Stock Academy. The main purpose of

this Agreement is offering training sessions – in London and Bucharest – for the Romanian specialist, but

also for representative of the important institutions acting or influencing the welfare of the national

capital market.

14 Sri Lanka SEC SEC Capital Market Education & Training Division (CMET) has a qualification framework for financial

sector professionals and SEC has made this qualification compulsory to work as an “Investment Advisor”

in the stockbroking industry.

Courses conducted by CMET

Certificate in Capital Market

Diploma in Capital Market

Continues Professional Development Program

Investor Programme

Advanced Investor Programme

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“Fit and Proper” personnel and specific academic qualification and experience will be required for other

Market Intermediaries.

15 Thailand1 ThaiBMA Under the SEC‟s regulation, bond traders are required to register with ThaiBMA. In order to register,

traders have to satisfy the set criteria and pass the registered trader examination administered by

ThaiBMA. ThaiBMA will be responsible for ensuring that trading practice of registered traders follows the

established Ethics and Code and Conduct for the bond market.

16 Thailand2 ASCO Pass the Securities Investment Consultant Examination (device to 10 papers depend on products) and

register to SEC. Refresh 15 hrs. every 2 years (Continuing professional Education programs)

17 Turkey TSPAKB - Licensing requirements were introduced by the Capital Markets Board (CMB), the main

regulatory authority in the capital markets, in August 2001. The licensing system aims to

assess the professional qualifications and the knowledge of persons working at capital

market related jobs. The first licensing examinations were held in September 2002.

- Since 2011, exams are organized by the recently established Capital Market Licensing and

Training Agency (CMLTA) with the cooperation of TSPAKB.

- Licenses are issued by the CMLTA upon application of successful candidates at the exams.

Detailed records of the licensed professionals are kept at the CMLTA‟s registry, and

information on registered professionals is partially available to the public.

- The CMB introduced several types of licenses for market professionals. The first seven of the

below-listed licenses are required for employment at intermediaries (banks and brokerage

firms) and others for employment at other institutions such as rating agencies.

1. Basic Level: Required for branch managers, representative office managers.

2. Basic Level Customer Representative: Required for client advisors.

3. Advanced Level: Required for managers, research and corporate finance analysts.

4. Settlement & Operations: Required for back office employees.

5. Derivatives: Required for derivatives traders, managers and back office employees.

6. Derivatives Customer Representative: Required for derivatives client advisors.

7. Derivatives Accounting & Operation: Required for back office employees.

8. Real Estate Appraisal: Required for mortgage and real estate appraisers.

9. Residential Real Estate Appraisal: Required for mortgage and real estate appraisers.

10. Credit Rating: Required for employees of credit rating agencies.

11. Corporate Governance Rating: Required for employees at corporate governance rating

agencies and employees at investor relations departments of listed companies.

12. Independent Auditing: Required for independent auditors of listed companies and

intermediaries.

18 UAE (DIFC) DFSA In order to conduct financial services in or from the Dubai International Financial Centre, individuals or

entities need to seek authorisation from the DFSA. Authorisation is given in the form of a license which is

issued by the DFSA, which specifies the type of financial services that can be conducted. The financial

services activities which require regulation if they are carried out by way of business are as follows:

- Accepting deposits

- Providing credit

- Providing money services

- Dealing in Investments as principle

- Dealing in Investments as agent

- Arranging Credit or Deals in Investments

- Managing Assets

- Advising on Financial Products or Credit

- Managing a Collective Investment Fund

- Providing Custody

- Arranging Custody

- Effecting Contracts of Insurance

- Carrying Out Contracts of Insurance

- Operating an Exchange

- Operating a Clearing House

- Insurance Intermediation

- Insurance Management

- Managing a Profit Sharing Investment Account

- Operating an Alternative Trading System

- Providing Trust Services

- Providing Fund Administration

- Acting as a Trustee of a Fund

- Operating a Representative Office

Before the DFSA can authorise a firm as an Authorised Firm, the DFSA needs to be satisfied that the firm

meets its Fit and Proper test, and is likely to do so on an ongoing basis. Generally, Fit and Proper means

the ability to carry out a financial service competently, with honesty and integrity.

The areas the DFSA assesses include:

- Legal status: A firm must be a body corporate or partnership. It can be formed in the DIFC, or a

firm can establish a branch of a legal entity based in another jurisdiction. In the latter instance,

the DFSA would expect the outside jurisdiction to have internationally compliant regulatory and

legal standards.

18

- Location of offices: A firm must carry on its activities from a place of business in the DIFC.

- Ownership and group structure: The DFSA seeks to establish that it will be able to effectively

supervise the firm. Therefore an applicant needs to make the DFSA aware of any Close Links (eg

parent, subsidiary, sister company) which could hinder effective ongoing supervision.

- Adequate resources: A firm must have adequate resources to carry out the proposed financial

services including financial resources and adequate systems and controls. A firm must have an

internal audit function.

- Senior management: A firm must appoint a Senior Executive Officer, a Compliance Officer, an

Anti-Money Laundering Reporting Officer and a Finance Officer. These individuals need to be

Authorised. The first three positions require the individuals responsible to be resident in the

UAE. As part of the licensing process, we will evaluate the competence and integrity of the

proposed senior management team.

19 Vietnam VBMA According to Decision No. 15/2008/QĐ-BTC dated 27-3-2008 by the Ministry of Finance, there are 2 types

of certificates relating to securities business that market professionals must have, namely: Securities

Business Practising Certificate and Securities Professional Certificate.

- Securities Business Practising Certificate gurantees that the holder is eligible to hold professional

positions at securities firms, fund management companies, securities investment companies operating in

Vietnam.

- Securities Professional Certificate guarantees that the holder meets necessary qualifications in securities

and stock market.

A market professional must hold Securities Professional Certificate before attending the exam for the

Securities Business Practising Certificate. There are 3 types of Securities Business Practising Certificates,

including:

- Securities Brokerage Certificate

- Financial Analysis Certificate

- Fund Management Certificate

1. To attend the exam for Securities Brokerage Certificate, the Securities Professional Certificate must

comprise of qualifications on Basics on securities and stock market; Laws on securities and stock market;

Securities Analysis and Investment; Securities Brokerage and Investment Advisory.

2. To attend the exam for Financial Analysis Certificate, the Securities Professional Certificate must

comprise of qualifications applied to brokers, together with qualifications on Financial Advisory and

Issue Underwriting, and Analysis of Corporate Financial Statement.

3. To attend the exam for Fund Management Certificate, the Securities Professional Certificate must

comprise of qualifications needed for the Financial Analysis Certificate and qualification onFund and

Asset Management.

Exams are held by the Securities Research and Training Center under the SSC.

VBMA also provide the training course on the Fixed Income Trading Techniques for dealer in the market.

We expect that in the time to come, all dealer must attend this training course.

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III –3. Securities Firms Inspection or Audit

No. Country Name of

Organization

Securities Firms Inspection or Audit

1 Cambodia SECC The SECC has conducted on-site and off-site inspection to the securities firm. The securities firm shall

submit the periodic financial statement to the SECC.

2 China SAC "SAC Member Management Measures" stipulates that Association members should submit business and

financial information in accordance with the demands of SAC on regular or irregular period, meanwhile,

accept evaluation organized by SAC coordinating with self-regulatory management. Related provisions

exist in the self-regulatory rules for businesses of securities companies, SAC supervises the practices of

securities companies, including self-run, margin purchase and short sale, asset management, risk control,

anti-money laundering and investor education, etc.

3 India ANMI SEBI and the Exchanges inspect members‟ books for adherences to compliance requirements as stipulated

by them from time to time. Generally, all inspections are on-site inspections. The authority conducting the

inspection may call for additional records.

4 Indonesia APEI The Capital Market Supervisory Agency & Financial Institution (Bapepam-LK) and the Indonesia Stock

Exchange (IDX) perform regular and unregular audits annually on all companies in the industry. An audit

or even an investigation may be completed by visiting the head office or branch office of the members of

stock exchange when needed.

In conducting the audit or investigation, the Capital Market Supervisory Agency and Financial Institution

Supervisory Agency (Bapepam-LK) and the Indonesia Stock Exchange (IDX) will conduct an examination

of books, licensing, standard operating procedures, systems and other compliance documents.

5 Japan JSDA JSDA inspects the observance by member firms, etc. of laws and regulations, the condition of the business

and assets of member firms, their books and records and other items. Currently, JSDA conducts four

types of inspection, namely General Inspection, Special Inspection, Follow-up Inspection and Moving/

Continuous Inspection.

In principle, inspection is conducted by visiting the head office, branch office, sales office, or other facility

of the member firm and inspecting its accounting records etc. (i.e., onsite inspection). In some cases,

instead of onsite inspection, off-site or document-based inspection may be conducted using accounting

records etc. submitted by the member firm subject to the inspection without visiting the said firm.

6 Kazakhstan FSC According to the Law “On securities market of the Republic of Kazakhstan” The Committee has right to

carry out inspections of activities of issuers, licensees, central depository, self-regulating organizations,

stock market professionals.

The reasons to initiate inspections are as follows:

- complaints of investors;

- complaints of shareholders;

- complaints of professional participants of the securities market and self-regulatory organisations;

- discrepancy of information in documents or details, provided by issuers for the state registration of

shares emission.

- discrepancy in reports of licensees activity;

-violation of market confidence, including price manipulation, insider trading, etc.;

- other facts.

The on-site inspections are conducted on regular basis in accordance with a Committee‟s inspections plan.

Also the securities market participants are inspected through the off-site supervision by special units.

Examiners are monitoring the conduct of business activities by reviewing and analyzing of the financial

statements, statutory returns and or any other reports submitted by licensees. The objective of off-site

supervision is to quickly identify negative trends and emerging problems and to resolve the issues before

they become serious that could dramatically effect organization‟s financial condition.

7 Lao SECO SECO inspects the securities firms as well as their securities business operations, financial statement,

utilization of their registered capital and other items specifying in regulation on securities related business

inspection. SECO conducts two types of inspection, namely General inspection and Ad hoc inspection.

8 Malaysia ASCM Bursa Malaysia closely supervises the business conduct of brokers and their representatives with the aim

to achieve the following objectives:-

To ensure secure, fair and orderly trading environment through effective monitoring and supervision

To ensure adequate protection of investors who engage the services of the brokers for trading

To effectively monitor the activities of brokers to ensure that brokers are providing secure and trusted

services to investors

Bursa Malaysia regulate and supervise two groups of brokers:-

stock brokers (stockbroking companies) i.e. Participating Organisations

futures brokers (futures broking companies) i.e. Trading Participants

Supervision of brokers is carried out in the following manner :-

Inspection - conduct scheduled and/or ad-hoc inspection visits to the office premises of brokers with the

focus to assess their degree of compliance, level of market conduct and adequacy of clients' assets

protection

Compliance Monitoring – ensure timely reporting by brokers, conduct analytical review on their

periodic submissions and raise alert when the needs arise

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Financial Monitoring - monitor the brokers' financial condition and ensure their compliance with

minimum financial requirements from various aspects

Registration – ensure all licensed brokers, their key staff and licensed personnel are duly registered

with Bursa Malaysia for monitoring purpose

Others - Evaluate and process applications received from brokers that require prior consent of Bursa

Malaysia before implementation, which among others, include applications for new business activity

and establishment of new office premises

9 Mongolia MASD The Law prescribes as follows;

19.2. Professional participants in the securities markets have the following responsibilities

19.2.1. To submit the information and reports related to securities transactions elaborated in

compliance with the relevant methodology and forms;

19.2.2.To determine and follow the fees for registration securities transaction, settlement and depository,

membership and seats and fees for other related services;

19.2.3.To issue and allow the regulations and instructions for their own activities by the permission of the

Commission in conformity with laws.

19.2.4.To inform to the Commission and the public in case its members, an issuer of the securities and

other participants in the securities related to the law;

19.2.5. To submit its audited semi-annual and annual financial statements elaborated on time specified by

the Accounting law to the Securities Commission and to the professional participants in the

securities markets publish its balance sheets and inform the investors about it;

19.2.6. To have and update the list of insiders and monitor the performance of their duties.

19.2.7. To provide increased persons by fair information on timely basis;

19.2 8.To make transactions related to securities trading and options on fair, transparent and timely

manner;

19.2.9.To submit the proposals for improving the activities in the securities markets to the Securities

Commission;

19.2 10. To protect the common interests on an issuer and an investors;

19.2 11 To have the Risk funds. The sources of risk funds shall come from shareholders capital and from

the company profits.

The association should request its members to implement and follow the above general duties and relevant other

responsibilities, established by other regulations and provide training into them. The association has not right to

inspect them and only FRC inspects their activities.

10 Myanmar CBM The supervisory body for security market will be the Myanmar Security Exchange Commission in

Myanmar. However, that commission has not been established yet and Myanmar has not decided that the

commission will be under the Ministry of Finance and Revenue or not.

11 Pakistan SECP System Audit of the brokers is being carried out on annual basis by the auditors in line with the

Regulations of the Stock Exchanges. The said regulations require that all eligible Brokers shall be audited

once in each audit cycle of two-year period. The selection is made through biannual balloting. An eligible

broker is defined as one who has operational track record of at-least one year preceding the ballot

Compliance Wing of the SECP also carries on site and off site inspection of the brokers.

12 Philippines CMIC The Audit and Compliance Department of CMIC shall conduct annual regulatory examinations to

determine and to verify compliance by trading participants with relevant Exchange rules and Securities

Laws. The Audit and Compliance Department of CMIC shall emphasize, but shall not be limited to the

examination of the trading participants‟ compliance with the following rules:

1. Books and Records Rule;

2. Risk-based capital adequacy and other financial ratios necessary to determine adequate capital for

operation;

3. Customer Protection Rule; and

4. Relevant provisions of the Securities Laws on the business conduct and sales practices of trading

participants.

Further, the Audit and Compliance Department of CMIC shall perform a monthly spot audit on the

trading participants which shall be prompted by the following parameters:

1. Net liquid capital, or NLC, with 10% variance from previous month to current month;

2. NLC below the required minimum limit (at least P5,000,000 or 5% of the aggregate indebtedness

whichever is higher);

3. Risk-based capital adequacy ratio is below 120%;

4. Deficiency on reserve requirement; and

5. Unimpaired paid-up capital.

The parameters may be revised, if necessary.

The Audit and Compliance Department of CMIC shall also conduct examination of TPs‟ registered branch

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or agency.

13 Romania RSBA The securities companies are inspected one every two years by representatives of the Romanian National

Securities Commission. During these visits are inspected mainly the account records of the company.

In the near future, the security companies, and the other participants to the capital market, will be

requested to present audited informatics systems.

Staring this September, all the securities companies are compelled to set up financial records according to

the International Financial Reporting Standards (IFRS). These reports are subdued to external audit.

14 Sri Lanka SEC The CSE Broker Supervision Division and the SEC Supervision Division conduct both risk-based on-site

and off-site inspection of Broker Firms and of all market intermediaries respectively. Off-site inspection is

conducted by reviewing the monthly and audited financial statements which are submitted by the

regulated entities. Off-site inspections are conducted based on the risks identified during on-site

inspections and also when a special need arises.

15 Thailand1 ThaiBMA ThaiBMA acts as a front line regulator to detect unfair trading practices by using Market Surveillance

System which facilitated the task of detecting and evaluating suspicious patterns and potential fraudulent

practices such as price or volume manipulation, series trading, excessive markup, and etc.

ThaiBMA also conducted 2 types of inspections, namely Regular inspection and Special inspection with 2

approaches (1) onsite inspection by visiting member firms‟ office and facilities related to their bond trading

i.e. trading account, electronic data, and etc. (2) off-site inspection by using document-based without

visiting member firms.

16 Thailand2 ASCO By SEC under Securities and Exchange Act B.E2535 and the Stock Exchange on the trading activities.

17 Turkey TSPAKB TSPAKB makes necessary investigations independently on the regulations of the Association, evaluates

the complaints against its members and also assists in the resolution of disputes arising from off-exchange

transactions among its members or between its members and investors.

Investigations are made by site-visits and/or by asking for written defence in case of complaints.

On site investigations of the members are not done regularly by the Association, but rather on a

case-by-case system initiated by a complaint from a client or another member.

In this context, the Compliance and Legal Affairs Department of TSPAKB, with 3 personnel, conducts

inspections when necessary.

18 UAE (DIFC) DFSA The Supervision Division‟s primary responsibility is to assess, monitor and mitigate risk in Authorised

Firm‟s (AF), Ancillary Service Provider‟s (ASP) (law/accounting firms), and auditors. Stringent review of

proposed new entrants occurs during the licensing process and continuing vigilance is maintained through

inspections, supplemented by off-site surveillance. Firms‟ proper conduct of business, financial health and

adherence to laws, regulations and prudential standards are assessed by a team of experienced regulators.

Timely remedial action is instituted to address weaknesses, objectionable practices or adverse conditions

identified by our supervisory activities.

Under the Supervision Module, there are various types of on-site visits by the DFSA on Authorised Firms,

which differ in their objective and frequency depending on proportionality of the risks that they pose to the

DFSA‟s objectives. The greater the impact and probability of the Authorised Firms perceived risks, the

more intensive the on-site visits. The DFSA requires AF‟s registered external auditor to co-operate with

the DFSA in a number of ways, including the submission of specific audit reports and statements.

The Markets Division, on its part, is responsible for the licensing and ongoing supervision of exchanges

and clearing houses based in the DIFC. It also recognises licensed entities seeking Recognition status,

either to operate as exchange or clearing house in the DIFC or to become members of exchanges located in

the DIFC.

19 Vietnam VBMA Inspectors from the State Securities Commission (SSC) inspects securities firms to assess the compliance

to legal documents on securities and stock market

Exchanges supervises securities member firms in the compliance to membership obligations, including:

Maintenance of eligibilities for membership

Securities trading of members

Reporting and information disclosure of members

Handling violations of trading members

The inspection and supervision is applied to activities of securities firms, branches and transaction offices.

This activity is planned yearly. Besides, there are unscheduled inspections at the request of the SSC‟s

Chairman and authorities.

The SSC inspection is also carried out based on reports from exchanges and other SSC agents on the

violation of securities firms. After defining the level of violations, the inspection board announces the

inspection to the securities firms and starts collecting evidences by visiting the securities firms and asking

the firm to providing original copy of necessary documents. The conclusions are drawn after the analysis

and assessment of accounting figures as well as professional activities.

The securities firm also has the internal audit system and has the yearly financial statement audited an

auditing organization approved by the SSC.

VBMA is not empowered by regulator to do these duty

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III –4. Disciplinary Action and Measures Against Misconducts

No. Country Name of

Organization

Disciplinary Action and Measures Against Misconducts

1 Cambodia SECC According to Law on Issuance and Trading of Non-Government Securities, There are two kinds of

administrative disciplinary action. One is applied to companies such as securities company, issuing

company and other market participants while other is applied to individual.

According to the Anukret (Sub-decree) on the Implementation of the Law on Issuance and Trading of

Non-Government Securities, a person who contravenes any provisions of this Anukret or any requirement

prescribed in accordance with this Anukret, shall commit an offence and be liable to punishments in

accordance with the existing laws and provisions in the Kingdom of Cambodia. Meanwhile, under the

Prakas (Regulation) on the Code of Conduct of Securities Firms and Securities Representative, any person

who contravenes any provisions of this Prakas, the Director General of SECC is authorized to apply the following

administrative sanction:

- A warning

- A correction order

- A suspension or dismissal of directors and/or senior officers.

- Imposing restrictions on the license

- A suspension or revoke the license.

2 China SAC SAC Member Management Measure stipulates that SAC could take the form of written or verbal

reminders or questions to talk to members or practitioners for violation of laws, regulations,

administrative rules and regulations of SAC, and disciplinary action is allowable according to the

seriousness of the circumstances. Association members can be given disciplinary measures, such as

warning, criticism within the industry, public reprimand through the media, suspension of membership

rights, suspension or cancellation of membership qualification. The form of disciplinary action can be used

alone or in combination.

Members and practitioners, who subject to disciplinary action, must participate mandatory training

organized by Association. The disciplinary action to members and practitioners should be investigated by

SAC self-discipline Commission, and put forward opinions on the results of the investigation. SAC is

entitled to make decisions on punishment under its regulations and other self-regulatory rules.

3 India ANMI Under the SEBI and Exchange regulations, disciplinary action is applied against the securities company

for any transgression of the governing laws by either the company or its employees.

The disciplinary action may include any of the following: (1) Reprimand (2) imposition of a fine (3)

suspension of membership for a defined period (4) Expulsion in case of a serious offence. Separately SEBI

may compound the offence by disgorgement of profits with a consent order.

4 Indonesia APEI Under the Law Number 8 Year 1995 regarding Capital Market (UUPM), disciplinary actions include:

1. Sanctions against the company in the form of:

- written warning

- penalty

- temporary suspension

2. Sanctions against individuals (Director and/or Employee involved in the Securities)

- written warning

- penalty

- temporary suspension individual license

- revocation of individual license

Before sanctions applied, in general The Capital Market Supervisory Agency and Financial Institution

Supervisory Agency (Bapepam-LK) as the regulator will ask for an explanation of the parties to the

offense committed and its supporting documents and the Regulator will apply a penalty based on the

results of the investigation that have been done and the activities will be automatically suspended if the

sanctions connected with the revocation of the license.

5 Japan JSDA Under the FIEA, there are two categories of administrative disciplinary action. One is applied to

companies such as securities companies, banks, insurance companies and so on. The other is applied to

individual sales representatives affiliated with those companies.

As the task of taking administrative disciplinary action against sales representative is assigned to JSDA

under the FIEA, JSDA also has two categories of disciplinary action. One is applied to the member firm on

its own misconduct while the other is applied to the member firm on the misconducts committed by its

employees.

There are five kinds of disciplinary actions to be taken against member firms when disciplinary action is

triggered, namely 1)reprimand, 2) imposition of a negligence fine, 3) limitation of membership, 4)

suspension of membership and 5)expulsion.

When employees of the member firm are to be disciplined, JSDA may rescind the registration or order

suspension of the business of a registered Sales Representative by specifying a period not exceeding two

years when he or she violated laws and regulations or was found to have conducted extremely

inappropriate acts concerning his or her duties of Sales Representatives.

However, when employees have their registration revoked, normally they also lose their sales

representative qualification at the same time. So, they have to re-qualify as sales representatives. Of

course, even if they do again acquire the qualification, they will have to wait five (5) years after the

revocation of their registration to become a registered sales representative again.

JSDA introduced a “permanent expulsion” system for officers or employees committing insider trading

violations.

6 Kazakhstan FSC If Committee identifies violations of the prudential requirements and other standards and limits

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obligatory for companies, violations of the legal acts of the Committee has right to apply the enforcement

measures both to companies and executives as follows:

- to require a letter of commitment;

- to compile a written agreement with the security organisation;

- to issue a warning;

- to issue a written prescription, obligatory for execution

- penalty

7 Lao SECO Person or organization who violates the provisions in the Decree on Securities and Securities Exchange

shall be subject to the following sanctions and penalties: (1) being warned in writing; (2) being fined; (3)

suspending or revoking a securities business license; (4) revoking the Securities Practitioner License; and

being subject to legal proceeding upon the character and scope of their violation.

8 Malaysia ASCM Business Rules of Bursa Malaysia Securities Berhad - Market Misconduct

The Business Rules of Bursa Malaysia Securities Berhad ("Rules of Bursa Securities") prescribe rules

relating to conduct of business, trading, settlement, etc. The key trading rules that Market Surveillance

focuses on are summarised below. For the full and latest provision, kindly refer to the relevant provision of

Business Rules of Bursa Malaysia Securities Berhad.

1. Rule 401.1(2)

Participating Organisations (POs), Heads of Dealing (HD) and Dealer's Representative (DR) shall

refrain themselves from engaging in, or be a party to, any unethical practices that may damage the

confidence of investors and hamper the sound development of the stock market.

2. Rule 401.1(3)(a) and (b)

POs, HD and DR shall avoid, and shall not participate in any operation by others which might have

the same result, any act or practice which might lead to a false or misleading appearance of active

trading in any securities on the stock market of the Exchange or a false or misleading appearance

with respect to the market for, or the price of, any such securities; or directly or indirectly be

tantamount to stock market manipulations.

3. Rule 404.1(4)

A PO shall not allow any form of irregular and/or unhealthy practice to exist or prevail in its daily

and professional business conduct.

4. Rule 404.1(7)(c)

Every PO shall at all times maintain a proper supervisory programme and a system of internal

controls which must take into account among others, the PO's operations and proper conduct of its

business.

5. Rule 404.3(1)(a) and (c)

Every PO and every DR shall at all times observe professional standard of integrity and fair

dealing and conduct their business in a manner which contributes to the maintenance of a fair and

orderly market.

Capital Markets and Services Act 2007 ("CMSA") - Market Misconduct

The CMSA prescribes the laws among others, to regulate and to provide for matters relating to the

activities, markets and intermediaries in the capital markets.

Some trading related laws are explained below :-

1. Section 93 of CMSA - Front running

Front running refers to a DR or PO entering into a transaction of purchase or sale of securities in

priority to client's order.

2. Section 98 of CMSA - Short Selling

Short selling is the action of a person selling shares, which he does not own at the time of selling.

Essentially, the law provides that a person shall not sell securities to a purchaser unless, at the

time when he sells them:-

he has or, where he is selling as agent, his principal has; or

he believes on reasonable grounds that he has, or where he is selling as agent, his principal

has, a presently exercisable and unconditional right to vest the securities in the purchaser.

24

3. Section 175 of the CMSA - False Trading /Market Rigging

This involves matched transactions where the buyer and seller are the same i.e. either involving

the same Central Depository System (CDS) account or "passing around" a specific group of CDS

accounts. Transactions result in no change in beneficial ownership (NCBO).

Note: Essentially, the law provides that a person shall not create, or cause to be created, or do

anything that is calculated to create, a false or misleading appearance of active trading in any

securities on a stock market in Malaysia or a false or misleading appearance with respect to the

market for, or the price of, any such securities.

4. Section 176 of CMSA- Stock Market Manipulation

Stock market manipulation is the act of transacting in the securities of a company that will have or

is likely to have the effect of raising or lowering or maintaining the price of the company's securities

on a stock market, with the intention of inducing other persons to purchase or subscribe for the

company's securities. Such acts are illegal under the CMSA.

5. Section 188 of CMSA - Insider Trading

Insider trading or dealing is the purchase or sale of a company's securities effected by or on behalf

of a person with knowledge of relevant but non-public material information regarding the company

that may affect the price of the company's securities (price sensitive information) if made public.

In its commitment to deter and reduce breaches of the industry law, both Securities Commission and

Bursa Malaysia play their respective roles in enforcing the CMSA and Bursa Malaysia Rules. In

undertaking enforcement action, due process will be accorded where the defaulting parties are given

opportunity to provide explanation to Securities Commission and/or Bursa Malaysia.

In deciding the appropriate sanction to be imposed, a variety of factors are taken into consideration

according to the circumstances of each individual case. The factors taken into consideration include,

amongst others, public interest/deterrent element of the proposed penalty, antecedent character and

background of the defaulting party, nature of the breach and circumstances and manner under which the

breach was committed, mitigating and aggravating factors. As such, depending on the outcome of the

assessment of the various factors in relation to the facts and circumstances of each individual case, the

actions/ sanctions imposed may also vary even for the same breach by different parties.

The type of sanctions that may be imposed for the breach include:

reprimand fines

remedial actions

suspension

any other action deemed appropriate

9 Mongolia MASD FRC has rights to grant licenses the professional institutions that are participating in the securities market to deal

with professional activities on the securities market, monitor their activities, temporarily restrict and invalidate

thelicense. The Law stipulates as follows;

15.1. A regulations issued by the Commission to implement laws shall be followed by all participants in the

securities market.

The association has right to suspend membership and to inform the FRC and other related organizations of such

member and its professional if necessary.

10 Myanmar CBM Myanmar has not enacted the Security Exchange Law and the security market has not been established

yet.

11 Pakistan SECP The conduct of brokers in violation of the securities market laws is being directly handled by the stock

exchange of which the broker is a TREC (Trading Right Entitlement Certificate) holder. In case of the

violation of the Central Depository of Companies Act, action is initiated by the Central Depository

Company of Pakistan Limited, in accordance with the applicable legal framework.

The SECP, being the apex regulator monitors compliance of all the applicable securities market laws, rules

and regulations and takes such measures to avoid misconducts and takes disciplinary actions, where

required in the light of the applicable regulatory framework. Show cause notices are issued to the party

which appears to be in violation of securities market laws and orders are passed and penalties are imposed

on the party found guilty of any misconduct/violation after being given an opportunity of hearing and

analysis of facts and figures.

12 Philippines CMIC With respect to trading participants, and, in particular cases, issuers, the pertinent rules are found in the

CMIC Rules. For violations, the broker or issuer involved is subjected to investigation proceedings and

corresponding sanctions, as provided in the CMIC Rules.

CMIC shall have the jurisdiction to investigate and resolve: (1) all violations of the Securities Laws or the

CMIC Rules by Trading Participants, and (2) Trading-Related Irregularities and Unusual Trading

Activities involving Issuers, based on any of the following complaints, findings, reports or determinations:

a) written complaints filed directly with CMIC by customers, Trading Participants, or any aggrieved party

for alleged violation of the Securities Laws or these Rules; b) examination Findings of CMIC based on

25

regular annual examinations or for cause examinations of Trading Participants; c) reports of

Trading-related Irregularities or Unusual Trading Activities; and d) matters which CMIC has determined

should be investigated and resolved to enforce the Securities Laws and these Rules, including matters

referred to CMIC by the (Philippine) Securities and Exchange Commission, the clearing agency, and the

Disclosure Department of the Philippine Stock Exchange. Any Complaint or referral to CMIC for

investigation and/or resolution should be sent in writing to CMIC President and should state the

particulars of the Complaint or referral. CMIC may act on anonymous complaints or referrals provided

these contain sufficient leads or particulars to enable the taking of further action.

After evaluation, if the party involved is found to be in violation, the corresponding penalty, as provided in

the Article XII of the CMIC Rules, is then imposed, which penalty is published in the website of CMIC or

the Philippine Stock Exchange.

13 Romania RSBA According to the Romanian regulations, failing to observe the law or the regulation leads to

administratively, disciplinary or penal sanctions. The disciplinary actions can be applied to either the

company – securities company, bank, asset management company, etc. – or to the individual

representative of such a company.

The main administrative disciplinary actions undertaken by the Romanian National Securities

Commission are: warnings, fines, suspension of authorization, withdrawal of authorization, temporary

prohibition from carrying our certain activities and services which are subject to the law.

The Stock Brokers` Association applies only the suspension of membership or withdrawal of this quality.

14 Sri Lanka SEC Disciplinary matters relating to Broker Firms are referred by the CSE to the Arbitration & Disciplinary

Committee of the CSE(hereinafter referred to as “the DC”). After deliberations, the DC will give its

decision regarding the matter, which should be approved by the Board of Directors of the CSE. A Broker

Firm found guilty of any violation of rule shall be liable to a public reprimand and/or suspension of

membership and/or termination of membership as determined by the CSE Board. The SEC Act empowers

the Commission to cancel or suspend the Licence/Registration granted to stockbroker, stock dealer or any

other market intermediary.

15 Thailand1 ThaiBMA Under ThaiBMA‟s rule, there are two categories of administrative disciplinary action. One is applied to

member firms. The other is applied to individual registered trader affiliated with those member firms.

There are five kinds of disciplinary actions to be taken against member firms when disciplinary action is

triggered, namely (1) warning (2) probation (3) fine (4) suspension (5) revocation.

16 Thailand2 ASCO Under Securities and Exchange Act.2535

17 Turkey TSPAKB A member which acts contrary to professional honour, professional principles and rules, to legislations

related to the capital market activities and to resolutions of the TSPAKB can be fined according the

measures of the Disciplinary Regulation.

The following disciplinary penalties are applied, depending on the nature and importance of the act.

Warning: a written notice to the concerned member stating that it has to act more diligently and

carefully in performing its activities.

Censure: a written notice to a member stating that it is faulty in its profession and behaviour.

Fine: the amount is paid by the liable party to the Investors Protection Fund within 30 days

following the date of the notice.

Temporary exclusion from the Association membership: direct or indirect restriction of

professional activities of a member for a temporary period of time to be designated according to the

nature and importance of the incorrect act, not exceeding a period of 6 months.

Permanent discharge from the Association membership: in that case, the relevant institution

cannot operate in the capital markets ever.

The actions requiring temporary exclusion are insider trading and market manipulation. The action

requiring permanent exclusion is using customers‟ assets (cash or capital market instruments) in favor of

the member or third parties by issuing counterfeit documents or forging documents.

18 UAE (DIFC) DFSA Laws and rules of the DIFC administered by DFSA are enforced by the Enforcement Division. The

Division takes action pursuant to a referral from the Supervision or Markets Division in circumstances of

suspicion of any misconduct that may cause damage to the DIFC‟s reputation or to the financial services

industry in the DIFC. A wide range of enforcement powers are available to the Division. The DFSA may

accept enforceable undertakings, impose fines or censures, take licensing action or commence proceedings

in the Financial Markets Tribunal or the DIFC Courts. The Division also proactively tries to prevent

misconduct through education and outreach programs. The Enforcement Division frequently provides

assistance to other international regulators, and takes every opportunity to work closely with local

regulators.

19 Vietnam VBMA According to Decree No. 85/2010/NĐ-CP dated 02/08/2010 on penalties of administrative violations in the

field of securities and securities markets, where Domestic and foreign individuals, agencies and

institutions (hereinafter referred to as individuals and institutions) found guilty of administrative

violations in the field of securities and securities markets shall be subject to penalties in accordance with

this Decree, unless otherwise stipulated in international conventions of which Vietnam is a signatory or

participant.

Violations the field of securities and securities markets are categorized as follows:

a. Violations of rules and regulations of public offering of securities;

b. Violations of rules and regulations of public companies;

c. Violations of rules and regulations of listing of securities on Stock Exchanges;

26

d. Violations of rules and regulations of organizing securities market;

e. Violations of rules and regulations of securities business activities and securities business

practicing certificate;

f. Violations of rules and regulations of securities trading;

g. Violations of rules and regulations of securities business, securities registration, securities

depository; clearing and settlement of securities transactions; custodian banks; depository banks;

h. Violations of the rules and regulations of reporting regime and information disclosure;

i. Violations of the rules and regulations of auditing issuers, listing companies and business

organizations in the field of securities;

j. Violations of rules and regulations of inspection and examination of authorities;

Jurisdiction of giving administrative penalties

1. The SSC‟s Chief Inspector may:

a) Give a warning;

b) Impose a fine of up to VND 70,000,000;

2. The SSC‟s Chairman may:

a) Give a warning;

b) Impose a fine of up to VND 500,000,000;

c) Apply forms of additional penalties and other measures for correction as stipulated in the Decree.

Transferring the case with signs of crime to criminal prosecution:

The procedures of transferring the case with signs of crime to criminal prosecution are complied with as

stipulated in Article 62 of the Decree-Law of Treatment of Administrative Violations.

Disciplinary Action and Measures against misconducts in the fields of securities and securities market

will be announced on the website of SSC.

Right now VBMA is not empowered to do this duty.

27

III –5. Dispute Resolution System between Securities Firms and Customers

No. Country Name of

Organization

Dispute Resolution System between Securities Firms and Customers

1 Cambodia SECC Under the Law on Trading and Issuance of Non-Government Securities, for any dispute arising in

relation to the conduct of securities business the disputing parties may bring the case to SECC for

mediation before filing a lawsuit to a court, except a criminal case.

After receiving a complaint, SECC shall interrogate all parties about subject matters of the dispute and

try to mediate them based on laws, rules and regulations. Result of mediation shall be kept in a record

made by SECC stating whether or not both parties agree with the mediation. The mediation record must

be signed by SECC and all parties concerned each of whom must be provided with a copy of the record.

Any agreement reached in the presence of SECC shall be effective for execution.

In case the mediation has failed, each party may refer an unsettled mediation record to a competent

arbitral tribunal or appeal to a competent court. Valid period of the appeal to the arbitral tribunal

or the court shall be of 90 (ninety) days, otherwise the rights to appeal will lose.

SECC currently is in the process of drafting the Prakas (Regulation) on Dispute Resolution System as

well.

2 China SAC Ⅰ. SAC set up Securities Dispute Mediation Center in charge of the following tasks:

To investigate, handle industrial complaints and provide feedbacks

To provide appropriate assistancesfor protecting the rights of investors

To deal with complaints and dispute mediation

Ⅱ. The main principles in the process of dispute mediation

1. The company level: securities company can freely negotiate with customers, reach a settlement;

2. Association level: SAC Member Management Measure stipulates that disputes between securities

companies or disputes between securities company and clients could apply to the Association for

mediation. In addition.

3.The judicial level: if mediation can‟t be reached, involved persons may apply for arbitration or sue.

The measures and procedures for mediation of securities disputes are in progress.

3 India ANMI The SEBI regulations require all exchanges to organize a grievance redress cell for customers. At first, the

exchange attempts to conciliate between the disputants.

In case conciliation is frustrated, the disputants can refer the dispute to arbitration under the Indian

Arbitration Act. The exchanges specify the rules for Arbitration in accordance to the Arbitration Act. The

disputants may appeal against the arbitration award. The final award is binding on the disputants.

4 Indonesia APEI Investors in Indonesia may report a dispute to the Capital Market Supervisory Agency & Financial

Institution (Bapepam-LK) and it will conduct an investigation afterward. A settlement mediation can be

obtained through the Indonesian Capital Market Arbitration Board (BAPMI) as an intermediary in

dispute settlement via negotiation or reconciliation. If this measure is unsuccessful and the case not

related with the Capital Market criminal act, the dispute may be brought to the court.

5 Japan JSDA In April 2009, FINMAC (Financial Instruments Mediation Assistance Center: NPO) was established as a

new financial ADR organization for disputes between customers and financial instruments service

providers FINMAC evolved out of the previous “Securities Mediation and Consultation Center”, which was

an internal organ of JSDA.

The previous organization accepted complaints and consultations from customers about operations

performed by JSDA member firms and conducted “mediation” between member firms and their customers

to solve disputes concerning securities businesses operated by the members. After migrating to

FINMAC, the above mentioned services are being offered through contracted based business operators

such as members of Financial Futures Trading Association, Investment Trust Association, JSDA, Japan

Commodities Investment Sales Association and to the Specific Business Operators (individually registered

Type 2 financial instruments business operators, etc.)

6 Kazakhstan FSC Financial Institutions‟ Association of Kazakhstan (FIAK) was established in May, 1999.

The main FIAK‟ functions are the following:

- Participation in development of the regulation of the financial market and tax regulation;

-Participation in Kazakhstan financial, budget, tax and currency policies development and

implementation;

-Participation in further development of financial services market;

- Participation in the development and implementation of measures pertinent to the support and

protection of local entrepreneurs;

- Compiling, analyzing and summarizing proposals of FIAK members on the resolution of financial sector

issues and improvement of legislation pertaining to the financial sector subjects‟ interests;

- Establishment of the work groups on the priority and problem directions with the FIAK members‟

involvement, development of general proposals and implementation of such with the authorized bodies;

- Organization of joint discussions, round tables and Kazakhstan Financiers‟ Congresses, which have

become a regular event.

7 Laos SECO SECO is in the process of drafting the securities law and formulating the securities-related regulations.

8 Malaysia ASCM Any dispute will be handled as case per case basis by Bursa Malaysia which acts as the frontline regulator

of Malaysia capital market. In cases related to the CMSA, the Securities Commission will lead the

investigation task. Both the Securities Commission and Bursa Malaysia have their respective Complaints

Bureau department to handle customer reports against the securities firm. The report is then relayed to

the investigation units for further actions. Investigation reports will then be used as the basis to resolve

the dispute.

28

9 Mongolia MASD The Law stipulates as follows;

Protection of interests of investors

13.1. It is prohibited to disclose information on number of securities owned by an investor and related to that

information which was not disclosed for the public and it is also prohibited to offer of purchases of

securities by an interested person without owner’s permission.

13.2 If the professional participants in the securities markets violate the provision 13.1 of this Law it becomes

a justification/reason to suspend or revoke of granted licenses from those professional

organizations/participants in the securities markets.

Disclosure of information related to securities to investors

14.2. A professional participants in the securities markets shall disclose the following information to investors

at their request:

14.2.1. Documents related to special licenses to participate in professional dealings with

Securities in the markets and related to certificate of state registration;

14.2.2.Information about the capital, debt, loans and the state of financial situation of professional

market participants;

14.2.3. Information related to sanctions was imposed to any of their official in relation to her/his

professional activities;

14.2.4.Information on trading and on prices of trading for last 6 months issued by the professional

participants;

14.3 The false information disclosed to investors violating the provision 14.2 of this Law shall become a basis

for making changes to the Agreement made between the investor and the professional market participant or

to cancel the Agreement.

14.4 An investor has right during the process of purchasing and selling of securities to request any information

specified in the Law from an issuer or from the professional market participants.

10 Myanmar CBM Myanmar has not enacted the Security Exchange Law and the security market has not been established

yet.

11 Pakistan SECP The three Stock Exchanges operating in Pakistan have their own dispute resolution mechanisms for

handling disputes between the brokers and their clients. The Exchanges also have the mechanism of

arbitration in place to address such issues. The SECP, however, being the Apex Regulator also addresses

the grievances of the investors of the stock market in accordance to the statutes, laws, rules and

regulations in place.

Going forward, the arbitration procedure in place will be revamped to ensure greater efficiency,

transparency and ease of access to the investors and a Code of Conduct for Arbitrators will be introduced

which is expected to result in more independent and transparent decisions and increased investor

confidence in the arbitration process.

12 Philippines CMIC An aggrieved or interested party may file a written complaint with CMIC against any trading participant

for trading-related irregularities or other violations of the Securities Laws within six (6) months from

knowledge of its commission. If CMIC determines the complaint to be sufficient in form and substance to

justify an investigation under the CMIC Rules, CMIC shall proceed with the investigation of the

complaint in accordance with the procedure entailed by the Rules, which involves, among other matters,

the submission of certain pleadings and other documents.

After the issues have been joined, CMIC shall then assess the merit of the complaint based on the

submissions of the parties. If the complaint is without merit, CMIC shall immediately dismiss it. If the

complaint has merit, CMIC shall meet the parties within five (5) days from the date of filing of the last

pleading to discuss a possible amicable settlement, to clarify matters raised in the complaint, and to allow

the parties to introduce additional evidence on their behalf.

The proceedings before CMIC shall be in the nature of informal administrative hearings and CMIC shall

not be bound by technical rules.

If the parties agree to amicably settle the complaint, CMIC shall evaluate the amicable settlement to

ensure compliance with the Securities Laws. If the settlement is in order, CMIC shall dismiss the

complaint, provided that the parties have complied with the terms of the settlement. If the parties do not

agree to amicably settle the Complaint, CMIC shall consider the complaint submitted for resolution with

notice to the parties.

Verily, dispute resolution, or settlement, is only possible in investor complaints.

13 Romania RSBA The possible disputes between securities firms and customers are settled in a court of law, (or by direct

mediation). Recently the Romanian National Securities Commission has given an Executive Order that

obliged the Securities Firms to publish the evolution of the customers` claims.

14 Sri Lanka SEC Disputes between Broker Firms and the customers are resolved by the CSE. First the client must make

the complaint in writing to the Compliance Officer of the relevant Broker Firm. If he/she is not satisfied

with the decision, the client can refer the complaint to the CSE Secretariat. Thereafter, the CSE

Secretariat will inquire into the complaint and will give a decision. If a party in not satisfied with the CSE

Secretariat's decision, such party may appeal to the Dispute Resolution Committee (hereinafter referred

to as “the DRC”) of the CSE for a review the decision. The decision of the DRC must be ratified by the

Board of Directors of the CSE. Failure by a Broker Firm (who has not appealed to the DRC) to comply with

the decision of the CSE Secretariat, will result in the matter being referred to the DC of the CSE in order

to take disciplinary action against the Broker Firm.

15 Thailand1 ThaiBMA In case of bond trading disputes between members or between members and its client, the parties may

29

seek arbitration proceeding or mediation provided by ThaiBMA. Panel of Arbitrators shall be appointed

for this matter.

16 Thailand2 ASCO Under Securities and Exchange Act.2535

17 Turkey TSPAKB Investors in the Turkish capital markets can always resort to courts for all complaints.

However, if the customer prefers alternative dispute resolution methods, the procedure is determined

according the nature of the complaint.

- If the complaint relates to exchange transactions, the customer can resort to the related exchange

(Istanbul Stock Exchange-ISE or Turkish Derivatives Exchange-TurkDEX). The dispute resolution

method is similar to arbitration. The customer can decide to go to the court at any stage. The

decision taken by the exchange is binding for the parties. Appeals on the ISE and TurkDEX

decisions can be made to the Capital Markets Board (CMB). CMB decisions can be appealed to

administrative courts.

- If the complaint relates to off-exchange disputes, the customer can resort to the TSPAKB. TSPAKB

offers two alternative dispute resolution methods; arbitration and mediation.

Arbitration: If the related parties agree to do so, arbitrators are chosen from TSPAKB‟s list

of arbitrators. The decision is binding. Appeals against arbitrators‟ decisions can be made

to the Court of Appeals.

Mediation: TSPAKB helps the parties in solving complaints. TSPAKB‟s mediation

decisions are not binding.

- The CMB is not directly involved in customer complaint resolution. However, in case an investor

reports a complaint, CMB may initiate an inspection.

18 UAE (DIFC) DFSA The DFSA maintains a complaints section on its website which provides information on how complaints

are dealt with. Authorised Firms must maintain adequate mechanisms to deal with customer complaints.

These mechanisms are designed to help resolve any customer disputes by dealing with the company

directly.Authorised Market Institutions (Exchanges) in the DIFC are also required to maintain a

complaints mechanism. Before contacting the DFSA the customer should try dealing with the Authorised

Firm first. This can often be quicker and more efficient as it is also in the company‟s interest to resolve the

complaint If the customer is unhappy with this response received from the Authorised Firm or the

Authorised Market Institution then the customer can contact the DFSA.

The Financial Markets Tribunal (FMT) serves as an independent financial services disciplinary tribunal

to determine breaches of DFSA administered legislation and related regulatory proceedings. It is broadly

empowered with a remit and powers comparable to other international integrated financial services

regulatory tribunals. The FMT is operationally independent of the DFSA Board and Executive. Decisions

on originating proceedings before the FMT may be appealed to the DIFC Court. Decisions of the FMT on

appeals of Exchange decisions may be appealed to the DIFC Court on a point of law.

19 Vietnam VBMA In case of bond trading disputes between members or between members and its client, the parties may

request VBMA acting as mediation center. The mediation will followed the Mediation rule set by VBMA.

30

III –6. Investor Education Activities

No. Country Name of

Organization

Investor Education Activities

1 Cambodia SECC So far, the SECC has been trying to promote investor education in the securities sector for potential listed

companies, public investors, reporters, public, universities students, as well as other market participants

through conference, seminar/workshop, and training course. Also, SECC cooperated with a private

institute, Financial Institute of Cambodia (FIC), for providing education in the securities sector including

diploma decree and certificate.

2 China SAC At the end of 2011, the CSRC instituted Investor Protection Bureau in order to provide overall planning, ①investor

protection ②guidance ③supervision ④the program of comprehensive mechanism for legal system and inspecting

Regional Bureaus, Exchanges, Self-Regulatory Associations and main market bodies, which will be benefit for improving

the service quality and further the investors’ relief by-laws.

SAC had done a great deal of jobs, including:

1. To formulate and publish relevant member guidance and rules to strengthen the disclosure of risks, for example “the

Working Guidance of SAC Members on Investor Education”, “Investor Education Norms of Business Offices of

Securities Companies”, “Essential Clauses of Disclosure Document of Investment Risks of GEM Market”, “Equity

Notice of Investors holding Security Investment Fund”, “Guidance on Investor suitability Management”, etc.

2. For protecting investors, SAC gave plentiful publicities, and introduced investing production to the new investors.

Firstly, SAC made series of cartoons, handbooks on investor education. Secondly, SAC cooperated with CSRC

Investor Education Bureau to make public-interest advertisement on investor education. Thirdly, SAC carried out

advertisement selection activities on website.

3. SAC has been strengthening the education and training towards securities practitioners. Furthermore, SAC had

carried out evaluations on special projects of investor education and services.

3 India ANMI The association regularly conducts investor education and financial literacy programs. Soon we will

collaborate with SEBI for a comprehensive move on investor literacy programs aimed at the emerging

classes of investors from schools and colleges.

4 Indonesia APEI A sustainable activity, meant to grow and spread understanding among the public regarding Capital

market, including investment function and the Indonesia Stock Exchange (IDX) and other parties such as

the Securities Company, the professional associations and others implement

In order to increase the number of investors in capital market and increase investor knowledge of the

mechanisms associated with transactions in capital market, the Indonesia Stock Exchange(IDX)

collaborates with APEI regularly conducts investor education and financial literacy programs in the form

of seminars, workshops, training program, gathering, etc. to educate and enhance the capital market

knowledge of investors, the activities may include such as :

- socialization and education capital markets both for the public and market participants

- development of capital market information centers in the region

- study the characteristics of investors conducted on an ongoing basis

- socialization of reference securities holdings to investors and prospective investors

IDX Regular Education Program aims to arouse public interest in learning share investment thoroughly,

so that they will become competent investors, and at the same time, attract new investors, either retailed

ones or institutionals.

IDX regular education program divided into three levels :

1. Basic Education Program is the level for participants with less knowledge of share investment

2. Intermediate Education Program is the level for participants who have completed the Basic level and

are interested to learn more on share investment

3. Advance Education Program is the level for participants who have completed the Intermediate level and

are interested to learn more on other investment instrument in Capital Market

The establishment of IDX Corners is to introduce the Capital Market as early as possible to the academic

world. Currently, the establishment of IDX Corners is using the concept of 3 in 1 (co-operation between

JSX, University and Security Company) so that the academia can not only learn the Capital Market

theoretically, but are also able to practice it.

In order to develop Indonesia‟s capital market, Indonesia Stock Exchange also makes several direct

approaches to the public. One of them is through the establishment of the Capital Market Information

Center (PIPM) in potential regions.

5 Japan JSDA Currently, Japan envisages the following issues;

1. Need to change money flow from savings to investment

2. Continued low interest rates in a mature economy and growing difficulty to build wealth through

deposits and savings

3. Growing concerns about public pension system in an aging society

4. Complex financial products supplied through various sales channels (unexpected losses, financial

fraud, etc.)

Under these circumstances, JSDA acknowledges the increasing need for upgrading financial literacy

among Japanese citizens and has been conducting investor education activities as mentioned below;

• Supports school teachers by providing experience-based teaching materials, education programs

and information magazines, and holding seminars.

• Set up websites for teachers and students

• Supports securities research activities by university students

• Offers donated courses on securities through the Open University of Japan

31

• Holds “Investment Day” commemorative events

• Holds Investor Relation (IR) seminars: During fiscal 2011, JSDA held a total of 24 IR seminars in

Tokyo, Osaka and Nagoya in response to individual investors‟ strong need for business information

disclosure and to support the IR activities of listed companies. Altogether, 8,983 people

participated in these seminars.

As a member of the International Forum for Investor Education (IFIE), JSDA participated in its annual

conference in Seoul in May, 2012 and exchanged views with the members and relevant parties.

6 Kazakhstan FSC Within the framework of realization of the Program on development of the regional financial centre of

Almaty city till 2010 approved by Order #68 of Chairman of the Agency of the Republic of Kazakhstan on

regulation of activities of the regional financial centre of Almaty city from August 8, 2006 was made a

decision about creation of educational centre "Academy of the regional financial centre of Almaty city"

(Academy of RFCA).

Creation of educational centre was aimed to training/retraining of professional staff for financial sector, in

particular for the share market and financial organizations which were at the process of forming that

moment. The project is also aimed to increasing of financial literacy among population of the Republic of

Kazakhstan. Academy of RFCA is intended for education and training of specialists for the regional

securities market.

The main task of the Academy is creation of the system directed to training and retraining of professional

staff of the financial sector jointly with leading international educational centres.

Academy of RFCA establishes high requirements and criteria of getting qualification and certificate on

graduation from educational courses, that is why the knowledge acquired in our Academy allow you to

react swiftly to changes in sector of securities market and finance as a whole.

7 Laos SECO SECO has been conducting investor education activities by organizing seminars under the several topics

related to securities and securities market for the ministries, educational institutions and related

government agencies. Also, SECO has participated in the training in our counterpart‟s jurisdiction to

exchange experiences regarding the financial literacy.

8 Malaysia ASCM The industry‟s investor education role is spearheaded by Bursa Malaysia which also acts as the

promoter of Malaysia capital market.

The investor education activities are fully supported by the stockbroking community and public

listed companies as industry players.

Bursa Malaysia places great emphasis in market education in the form of training, dialogues,

conferences and direct engagements with our Listed Issuers and Brokers.

Creating awareness and providing continuous education to the listed issuers, directors and

advisers is key to ensure that the underlying principles of the Bursa Malaysia Listing

Requirements are embraced and adopted.

Collaboration with industry institutions and associations to carry out educational and awareness

initiatives which include conferences, roadshows and dialogues with listed issuers throughout

Malaysia to share our regulatory objectives and concerns to help build relationship of trust and

co-operation as well as promote a self-regulation culture.

Practice / guidance notes are issued from time to time to the listed issuers to aid them in compliance

with the rules. The latest developments relating to regulatory services, policies, framework, etc.

will also be updated in Bursa Malaysia website to enhance transparency of our regulatory roles to

the public.

Direct engagement with directors and advisers of listed issuers to promote higher standard of

conduct among listed issuers. This is carried out from time to time when issues need to be

immediately addressed and clarified.

Annual Conferences and Dialogues

Bursa Malaysia has organised annual conferences for compliance officers of both the securities and

futures industries and conducted dialogues with the management of brokers in various cities

located nationwide to achieve the following objectives :-

I) To enable brokers to learn new regulatory and compliance matters and tap the wide knowledge

of the speakers

II) To enable brokers to learn about the various breaches and issues in the industry from Bursa

Malaysia so that they can better address these issues

III) To provide an opportunity to have a dialogue with representatives of Bursa Malaysia to enable

the brokers to better understand the regulators‟ perspective and expectations

IV) To provide an opportunity for the regulator to understand and act upon the various concerns

faced by brokers

V) To enhance channels of communication between Bursa Malaysia and brokers so that they have

a point of reference when faced with regulatory and compliance issues

Engagement with Brokers

Bursa Malaysia carries out various engagements to maintain high standards of business conduct,

enhance self-regulation and prevent regulatory transgressions.

Bursa Malaysia conducts regular engagements with senior management and Board of Directors of

brokers through dialogues and conferences for compliance officers. One-to-one engagements with

senior management of brokers are also conducted to discuss our specific trading observations and

concerns. These engagements have proven useful as any regulatory concern which requires the

32

immediate attention of brokers will be highlighted during the session and brokers are then able to

address the concern instantly to prevent the condition / situation from deteriorating further.

Securities Industry Development Corporation

Securities Industry Development Corporation (SIDC) is the training and development arm of the

Securities Commission Malaysia (SC). It was established in 1994 and incorporated in 2007

It organises training programmes for Malaysian and foreign regulators, company directors and

market professionals as well as conduct public investor education seminars on wise investing and

investors' rights.

In collaboration with the SC, it develops examination questions and modules and conducts

licensing examinations as part of the licensing regime for Malaysian capital market intermediaries.

Market Chat

In line with the industry‟s retail strategy of sustaining and engaging existing investors, the

industry continued with the annual nationwide engagement programme called „Market Chat‟.

Market Chat remains an integral part of the industry‟s Retail Investor Engagement Programme

and is now in its fifth year with the launch of the 2011/12 series in October 2011.

The industry also participated in several retail investor conferences such as Minggu Saham

Amanah Malaysia, Minggu Kesedaran Kewangan 2012 and Asia Trader and Investor Convention

(Singapore and Kuala Lumpur).

9 Mongolia FRC The association and its some members organize a primary training for investors together. We have organized

“Investors’ education opening days” events with the FRC and its members for 4 times or since 2007. It made a book

of “Financial guidelines” for investors in 2010. Our website has a lot of presentations.

10 Myanmar CBM Implementation for the Development of Capital Market in Myanmar

The Capital Market Development Committee was organized on 1st July, 2008, led by the

Minister of Ministry of Finance and Revenue. Moreover, six sub-committees were organized

on September 17, 2008, so as to provide efficient assistance to main committee. These

sub-committees are:

Sub-committee for the development of domestic securities market

Sub-committee relating to establishment and encouragement of public companies

Sub-committee regarding the enactment of the Securities Exchange Law

Sub-committee concerning with the establishment of securities companies

Sub-committee for training, educating and information concerning with the capital

market and

Sub-committee for accounting and auditing standards for Securities Market

11 Pakistan SECP The SECP had earlier launched a comprehensive educational campaign aimed at creating awareness

among investors about securities market. A series of booklets were published for imparting valuable

information/knowledge to the general public. All the rules regulations and securities laws have been

placed on the official website of the SECP for access of general public. A list of member-brokers and their

agents registered with the SECP is also available on the same website. The exchanges have also been

advised to place list of their members and agents on their websites. Moreover, during the last few years

the SECP in collaboration with other capital market institutions has conducted various road shows both

local and abroad. Further, various IPO summits and Investor education seminars have been held and

sponsored by the SECP to educate and attract investors.

As part of future plans, a separate comprehensive Investor Education Plan has been prepared for

implementation jointly by the SECP and the market infrastructure institutions. The Plan includes various

educational activities for the investors including road shows aimed at domestic and international

investors; educational campaigns and seminars for retail investors, policy/decision makers, and pension

and insurance sectors. The Plan also envisages the development of a dedicated website/link, and

publishing informative material etc. Further, the key investor guides are in the process of revamping in

collaboration with the ICM to educate and attract all walks of life to the capital market and to equip them

with basic knowledge of this market.

12 Philippines CMIC CMIC develops a counseling approach towards trading participants of the Philippine Stock Exchange and

devises procedures and systems that will assist them as much as possible in complying with the rules.

Moreover, CMIC is in the process of realizing one of its purposes, which is providing training courses on

new or technical aspects of the rules to ensure that trading participants know what is required of them

and also assist in developing the culture of self-regulation and responsibility in the context of a securities

exchange which operates in the public interest.

13 Romania RSBA The context of the recent years has proven the need for educated investors, as the sophisticated financial

instruments offered and the wide access to the international markets have known a rapid growth.

Therefore the Stock Brokers` Association has offered trading on-line courses for those who are not

familiarized with the trading mechanisms in the capital market. After attending these courses the

participants are obtaining the basic knowledge about the capital market, trading financialinstruments

and composing a portfolio according to the investment type of each person. The on-line courses are

increasingly growing the difficulty level, starting with an “Introduction of the Capital Market”, following

with the second module: “Trading Financial Instruments” and finishing with “Technical and Fundamental

Analysis in making an investment decision”. The fourth courses present the advantages and the

33

opportunities of financing one‟s company through the capital market.

One other interest of the Stock Brokers` Association is the young generations of specialist. Therefore, the

Stock Brokers` Association has developed an agreement with The Academy of Economic Studies in

Bucharest – according to which, at the end of a contest, 4 students are offered a free trading course. The

Stock Brokers` Association also supports internship programs for students.

The Stock Brokers` Association also organizes seminars and conferences regarding the most important

changes in local and global markets – challenges for the local securities companies and investors.

14 Sri Lanka SEC The SEC has two Divisions in order to educate stakeholders of the Capital Market.

The SEC Capital Market Education & Training Division conducts a qualification framework for financial

sector professionals and also conducts certificate courses for investors.

The External Relations & Market Development Division is involved in educating

investors/students/undergraduates/teachers by organizing workshops, road shows, TV/Radio programmes,

publishing articles in papers/magazines and organising other promotional/educational activities.

15 Thailand1 ThaiBMA As part of our role in promoting investor education, ThaiBMA has established website to provide

information in both the primary market and secondary market for investors through www.thaibma.or.th

and www.thaibond.com. Our websites also provide research and articles about the bond market knowledge

and investment.

ThaiBMA regularly organizes free seminar for both retail and institutional investors. Advanced training

courses in the area of bond and financial market are also offered to professionals in the bond market at

minimal cost.

16 Thailand2 ASCO Capital Market Development Fund (CMDA) is the key function of investor education and operate by the

securities firms and the Stock Exchange (Thailand Securities Institute).

17 Turkey TSPAKB A joint investor education campaign was launched recently with the cooperation of relevant capital

market institutions.

TSPAKB financed a broad based financial literacy survey in 2010. A quantitative survey was done

with 2010 people, representing the whole population. TSPAKB also published a book about the

basics of Turkish capital markets and financial products.

Experts from the Istanbul Stock Exchange, the Capital Markets Board and the Association of

Capital Market Intermediary Institutions of Turkey visited several universities in order to create

and increase the awareness of capital markets among university students.

18 UAE (DIFC) DFSA The DFSA participates in investor education forums such as the DIFC Knowledge Series, organizes

regular outreach sessions for Authorised Firms to address relevant regulatory topics, issuing of DFSA

investor alerts in relation to scams and fraudulent activities.

19 Vietnam VBMA - Quarterly, The Dialogue between Regulators and VBMA members and non – members is organized. The

Dialogue is a communication channel between regulators and market players. At the Dialogue, The

Regulators popularize new policies to the market players and the market players update the market

situation to the Regulators.

- The Investor Guide is under the preparation and will be published soon

- To help the reporters to understand about the whole picture of the bond market and its operation that

help them in writing the news for the media, a training seminar was organized for the reporters.

- The basic and advance training for member is organized.

- The Investors Conference is also organized yearly.

34

IV. Market Structures

IV – 1. Breakdown of Financial Assets held by Household Account

No. Country Name of

Organization

Breakdown of Financial Assets held by Household Account

1 Cambodia SECC In Cambodia, a significant part of the financial assets of household are placed in cash deposits, while in

stock is very low occupying a smaller portion. But stocks starting to gain recognition from the investing

public and it will be considered as a large portion in the near future.

As of the end of December 2011, Household Account amounted as follows:

Currency and Deposit KHR 19,830 billion (≈ 4.95 billion USD)

As of 25 September 2012

Stock Market Value KHR 548 billion (≈ 137 million USD)

2 China SAC By June 30, 2012, bank deposits reached 90.881trillion RMB, the total stock market valued at21.93 trillion RMB, total

amount of bond is 22.8 trillion RMB bonds at par.

3 India ANMI Composition of (Changes in) Gross Financial Asset

Period Currency Bank

Deposits

Non

Banking

Deposit

Life

Insurance

Fund

Provident

and

pension

fund

Claims on

Govern-

ment

Shares

and

Debentu

res

Units of

UTI

Trade

Debt

(Net)

Gross

Finan-

cial

Asset

1970s 13.9 45.6 3.0 9.0 19.6 4.2 1.5 0.5 2.7 100

1980s 11.9 40.3 4.6 7.5 17.5 11.1 3.9 2.2 0.9 100

1990s 10.3 34.7 6.8 10.1 18.8 9.5 7.0 3.8 -1.0 100

2000s 9.6 44.7 1.3 17.4 12.4 11.1 4.1 -0.5 0.0 100

2000-

2005

8.9 37.8 2.0 14.7 15.1 19.5 2.8 -0.9 0.0 100

2005-

2011

10.7 49.9 1.7 19.9 10.3 3.5 4.3 -0.2 0.4 100

Projections of Household Savings Rate (in % of GDP)

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 12th Plan

Average

Household

Savings Rate

23.2 23.6 24.0 24.4 24.8 25.2 24.4

4 Indonesia APEI n/a

5 Japan JSDA At the end of FY2011 (Apr. 2011 to Mar. 2012), the financial assets of households totaled 1,513.3 trillion

yen, up11.2 trillion yen from a year earlier.

In terms of their composition, the proportions of stocks and other equities and investment trusts declined

to 6.5% and 4.0%, respectively, reflecting the drop in stock prices. In contrast, cash and deposits further

increased its share of overall household financial assets to 55.2%. This result indicates that households

still maintain a strong preference for low risk, secure assets when investing.

FY2008 FY2009 FY2010 FY2011

FY2011

(Amount)

(¥ trillion)

Financial Assets of Household 1,454.6 1,490.9. 1,502.1. 1,513.3 1513.3

Currency and deposits 54.5% 54.0% 54.3% 55.2% 835.0

Bonds 2.7% 2.6% 2.4% 2.2% 32.8

Investment trusts 3.5% 4.1% 4.2% 4.0% 60.8

Trust beneficiary rights 0.2% 0.2% 0.2% 0.1% 2.1

Shares & Other Equities 5.4% 6.5% 6.6% 6.5% 97.7

Insurance and pension reserves 29.4% 28.1% 28.0% 27.9% 421.7

Overseas Portfolio Investment 0.5% 0.7% 0.7% 0.8% 12.3

Oｔhers 3.7% 3.7% 3.5% 3.4% 50.6

(source) Bank of Japan

6 Kazakhstan FSC n/a

7 Laos SECO Amount: Billion Kip

Financial Assets of household 2009 2010 2011

Currency in circulation 3,579.58 4,504.52 5,661.18

Deposits 13,354.61 18,598.45 23,532.24

Stocks 1,027.24

Source: Bank of the Lao PDR, Lao Securities Exchange

8 Malaysia ASCM Total financial assets held by household accounts for year 2010 was at RM1,386 billion. Composition of the

household financial assets is as below.

Financial Asset

Percentage of composition (in %)

35

Deposits with Financial Institutions 31

Savings with Employee Provident Fund 30

Equity holdings 17

Unit trust holdings 16

Endowment policies 6

Total 100

9 Mongolia FRC

On June 3, 2011, Parliament authorized government to issue bonds worth ₮300 billion with the purpose to support

national producers and increase jobs.

Parliament resolved issuing loans worth ₮100 billion in order to increase jobs to producers of value added products, such

as cashmere thread and cashmere end-products and ₮150 billion to small and medium-sized enterprises. Remaining ₮50

billion bonds were spent on herders who prepared and sold sheep and camel wool to national industries as a bonus.

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP The financial asset held in the individual investors‟ account maintained with the Central Depository

Company of Pakistan Limited is the individual‟s investments in securities whether or not listed on the

stock exchanges.

12 Philippines CMIC A substantial part of the financial assets of households in the Philippines are placed in cash deposits, with

stocks and bonds occupying a smaller portion of the sum total. Nevertheless, recent figures have shown

that stocks and bonds are starting to gain recognition from the investing public.

13 Romania RSBA

14 Sri Lanka SEC n/a

15 Thailand1 ThaiBMA Government Debt Securities Outstanding Classifiedby Group of Holders

Stock and bond trade

(bln MNT)

Government bond: 236.7 bln

Corporate bond: 4.4 bln

36

Source : Bank of Thailand

Long term Corporate Bond Holder

Source : ThaiBMA

16 Thailand2 ASCO Bank deposit 33% Insurance 15% LTF/RMF funds 29%

Equity/Equity fund 5% Debt instrument/bond 2% Government bond 4%

Bond fund 5% Gold 4% Others (ETF, derivatives) 1%

(source: SET, Nielsen reported by Kasikorn Research Center – 2 Aug.2010)

17 Turkey TSPAKB

Financial Assets of Households

2010 2011 2012/03

2012/03

(Bn. $)

Cash 9% 9% 9% 27.1

TL Deposits 53% 52% 52% 160.5

FX Deposits 20% 21% 20% 62.3

Equities 7% 6% 6% 20.0

Mutual Funds 6% 5% 5% 14.3

Pension Funds 3% 3% 3% 8.9

Bonds/Bills-Eurobonds 2% 2% 2% 5.7

Precious Metals 0% 2% 3% 8.2

Repo 0% 0% 0% 1.4

Total 100% 100% 100% 308.3

Source: Central Bank of the Republic of Turkey

Deposits (TL and FX) are the major component of the financial assets representing 72% of household‟s

total savings. Total deposit measure US$ 308 billion, as of end of March 2012. During the last three years,

while equities‟ share decreased slightly in total, the share of precious metals instruments increased.

18 UAE (DIFC) DFSA Information not available as such national statistics are not published in the UAE

19 Vietnam VBMA n/a

37

IV – 2. Share of Foreign Investors in the Stock Trading on the Exchange

No. Country Name of

Organization

Share of Foreign Investors in the Stock Trading on the Exchange

1 Cambodia SECC There is only one listed company, a state-owned enterprise, Phnom Penh Water Supply Authority

(PPWSA) in the Cambodia Securities Market (CSX) and started the first trading on 18th April, 2012.

From 18th April 2012 to 25th September 2012:

Company Trading volume (share) Trading value (Million Riel)

PPWSA 5,558,702 45,039(≈ 11 Mil USD)

Average per day 52,441 425 (≈ 106,250 USD)

2 China SAC In 2003, China launched the system of Qualified Foreign Institutional Investors (QFII). The system is the

only way for foreign investors to carry on the A-share trade. QFII system is a transitional institutional

arrangement for limitedly introducing foreign capital and opening capital market in the case of unopened

capital account.

According to the latest statistics from State Administration of Foreign Exchange and CSRC, there were a total of 172

QFII with the accumulated amount of $ 27.26 billionyuan by June 8, 2012.

3 India ANMI FII Activity (Equities)

Year Gross Purchase

(Cr)

Gross

Sale

(Cr)

Net

Investment

(Cr)

Cumulative

Investment

($Mn)

2005 286,021.40 238,840.90 47,181.90 10,706.30

2006 475,624.90 439,084.10 36,540.20 8,107.00

2007 814,877.90 743,392.00 71,486.30 17,655.80

2008 721,607.00 774,594.30 -52,987.40 -11,974.30

2009 624,239.70 540,814.70 83,424.20 17,458.14

2010 766,283.20 633,017.10 133,266.80 29,361.83

2011 611,055.60 613,770.80 -2,714.20 -357.83

2012 (January – August) 4,20,141.40 3,57,071.20 63,070.00 12,298.19

4 Indonesia APEI Indonesia was downgraded below investment grade since the crisis at the end of 1997, hence, foreign

investors which accounted for nearly 63% diminished drastically to a level of below 4% by early 1998.

Since then, gradually foreign investors came back to Indonesia, as of end of November 2011, it has reached

to a level of 59%. By mid-December 2011, Indonesia had been promoted again

to an investment grade country which many believe that in 2012, foreign investors may be more and more

attracted to invest their fund in Indonesia.

5 Japan JSDA Market Share & Trading Balance by Types of Investors

- Tokyo, Osaka, Nagoya -

Year Member

Account Individuals Foreigners

Investment

Trusts

Business

Cos.

Life &

Non-life

Citi BK &

Regional BK Trust BK

Other

Financial

Institutions

Market Share

2008 26.7% 16.7% 46.4% 1.9% 1.0% 0.2% 0.1% 5.0% 0.1%

2009 26.5% 21.5% 39.0% 2.4% 1.2% 0.3% 0.1% 5.7% 0.1%

2010 24.2% 17.6% 47.2% 2.0% 1.0% 0.4% 0.1% 5.0% 0.1%

2011 19.0％ 17.7% 53.2％ 1.8％ 0.9％ 0.4％ 0.1％ 4.8％ 0.1％

Net Selling (-)/Buying (+) (¥billion)

2008 -3,537 982 -3,708 301 1,632 -328 -36 -4,502 -193

2009 -1,987 -866 1,777 76 -184 -418 -277 1,440 -184

2010 -1,299 -2,277 3, 10 17 -273 -631 -245 962 -34

2011 -3,150 5 1,972 -138 617 -575 -81 789 30

(Source) TSE Monthly Statistics Report

6 Kazakhstan FSC n/a

7 Lao SECO Market Share & Trading Balance by types of investors

38

Year 2011 September 2012

Market Share

Government (%) 74.19 74.30

Domestic investors (%) 16.73 11.75

Foreign investors (%) 9.08 13.95

Net Selling (-)/Buying (+) (billion kip)

Foreign investors 35.73 72.69

8 Malaysia ASCM The table below indicates the market demography by trading value (in %) for domestic and foreign

investor categories since the past five years.

Year 2007 2008 2009 2010 2011

Foreign

Investors (%)

37 42 26 27 26

Domestic

Investors (%)

67 63 74 73 74

9 Mongolia MASD There have accounts of approximate 1000 investors to own their shares of Mongolian listed companies.

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP Trading by the foreign investors in the stock trading on the exchanges during the period from March 1,

2012 to August 31, 2012 was Rs. 47,228.19 million, which is 7.5% of the total traded value of the stock

traded on the exchanges during the period.

12 Philippines CMIC As per records of the Philippine Stock Exchange, the share of foreign investors in the stock trading on the

Exchange stands at 43.14% as of 11 September 2012.

13 Romania RSBA During the last year, as the world crisis continued, the Romanian capital market continued to be affected

by the economic crisis at the level of portfolio investments of the non-resident persons, due to their risk

aversion. This was visible in the situation of net capital inflow. The total gross inflow on the capital

market in 2011 was 1.69 bl. Lei, compared with 616.43 mil. Lei in 2010. Yet the total gross outflow last

year was above 1.63 bl. Lei. Thus the net capital inflow was 60.59 mil lei, compared with the 156.65 mil.

Lei in 2010.

39

(Source: RNSC)

14 Sri Lanka SEC

Turnover 2012* 2011 2010 2009

Equity Total (Rs. Mn) 546,255.8 570,326.8 142,462.6

Domestic(Rs. Mn) 77% 486,959.4 89% 464,733.6 81% 99,010.8 69%

Foreign(Rs. Mn) 23% 59,296.4 11% 105,593.2 19% 43,451.8 31%

*provisional up to 30-Aug-2012

15 Thailand1 ThaiBMA Foreign investors trading value during January to July 2012 captured by 50% of total trading value in

Stock market. We calculated this number by gathering information from the Stock Exchange of Thailand.

16 Thailand2 ASCO Approximately 25%

17 Turkey TSPAKB

Investor Breakdown of the Equity Trading Volume

2010 2011 2012/03

Domestic Total 84.4% 84.5% 81.8%

Domestic Individual 66.3% 68.0% 63.5%

Domestic Corporation 9.6% 8.1% 9.5%

Domestic Institutional 8.5% 8.4% 8.8%

Foreign Total 15.6% 15.5% 18.2%

Foreign Individual 0.2% 0.1% 0.1%

Foreign Corporation 10.7% 11.1% 13.7%

Foreign Institutional 4.7% 4.3% 4.3%

Source: TSPAKB

After increasing for five consecutive years from 2004 to 2008, the share of foreign investors‟ exceeded 25%

in 2008. Due to the global financial crisis, this trend reversed and foreign investors‟ share decreased to

around 15 % between 2009 and 2012/03. Foreign corporations, reflecting mainly financial institutions, are

the major investor group among foreigners.

18 UAE (DIFC) DFSA The DIFC and DFSA laws and regulation do not impose limits on foreign investor ownership or trading.

The international orientation of the NASDAQ Dubai, the DIFC exchange and clearing house, is evidenced

by the variety of the country of origin of the entities with listed equity securities, i.e. US, South Africa,

Bahrain, Jordan, Cayman Islands and India.

Listed companies which operate subsidiaries in the UAE are required to comply with the UAE Companies

Laws which stipulates foreign ownership limits.

In respect of 2 equity securities listed on NASDAQ Dubai

Primary Listed Shares UAE Nationals % Foreign ownership

DP World Limited More than 80% Not available

Depa Limited 51.18 % 48.82 %

19 Vietnam VBMA Foreign trading as % of market are 37.3% on HOSE and 7.08% on HNX. These are the statistics over the

last 2 weeks.

40

IV – 3. Share of Foreign Investors in the Bond Trading on Exchange/ OTC Market

No. Country Name of

Organization

Share of Foreign Investors in the Bond Trading on Exchange/ OTC Market

1 Cambodia SECC Bond market is not yet existent in Cambodia.

2 China SAC The same as the case of Stock Trading

3 India ANMI FII Activity (Debt)

Year

Gross

Purchase

(Cr)

Gross

Sale

(Cr)

Net

Investment

(Cr)

Cumulative

Investment

($Mn)

2005 7,015.50 12,553.20 -5,518.40 -1,224.50

2006 11,061.40 7,012.30 4,049.00 882.60

2007 31,418.90 21,991.30 9,428.50 2,340.10

2008 48,020.10 36,248.40 11,771.90 2,636.40

2009 111,773.40 107,210.10 4,563.40 1,049.13

2010 206,373.30 159,965.40 46,408.00 10,112.16

2011 288,858.70 246,793.50 42,067.00 8,654.62

2012 (January – August) 1,37,508.60 1,10,706.00 26,803.60 5,092.61

4 Indonesia APEI As of end of November 2011 the total of Corporate Bonds and Governments Bonds traded by foreign

investors reached US$.9,86 bio which is about 1,32% of the total bonds issued of US$.749,2 bio.

Government bond :

Since the endof last yearto August 2012 , Banking addingRp25, 58tn, the highest among other investors,

bringing its ownershipshare ofRp290,61 tnor36.19%

5 Japan JSDA

25%

3%

13%

7%

2%2%

19%

1%

28%

City Banks & Long-

Term Credit Banks

Regional Banks

Trust Banks

Other Financial Inst.

Life & Non-Life

Insurance Companies

Investment Trusts

Foreigners

Corporation &

Individuals

Others

*Trading among bond dealers is excluded.

6 Kazakhstan FSC n/a

7 Laos SECO Not applicable

8 Malaysia ASCM Exchange Traded Bond (ETB) was launched on 7 September 2012 (this year). Relevant guidelines and

regulations are expected to be issued by the Securities Commission (SC) in January 2013.

9 Mongolia MASD There is not OTC bond market. There have not share of foreign investors.

FY2011

41

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP 0.968 Million Bonds were traded on the Exchange/OTC Market during the period March 1, 2012 to August

31, 2012. However, no trading in bonds by the Foreigners has been observed during the period.

12 Philippines CMIC According to previous records, “[t]he Philippines opened 2012 with a 25-year, US$-denominated

benchmark bond to fund the country's economic stimulus projects. The government raised US$1.5 billion

from bonds carrying an interest rate of 5.0% and maturity by January 2037. The offer was heavily

subscribed attracting orders of $12.5B with the biggest demand coming from the US and locally, followed

by the rest of Asia and Europe.”

Further, in 2012, “the government plans to raise another $2.5 billion from overseas bond sales in 2012 and

about 75 percent of its debt sales will be in the domestic market to help plug a deficit projected to hit 286

billion pesos ($6.54 billion) as the government steps up infrastructure spending to spur economic growth

amid sluggish global demand.”

13 Romania RSBA Due to the small depth of the Romanian bond market, the foreign investors` interest in this type of

instruments was equally small last year.

According to the RNSC statistics in 2011 there were no bond transactions performed by foreign investors,

as compared to the year before when the spent over 113.55 ml Lei in buying bond, and the soled of only

23,918 Lei.

14 Sri Lanka SEC Corporate Debt Securities trading on the CSE (DEX system)

Turnover 2012* 2011

2010

2009

Corporate Debt

Securities Total (Rs. 000)

2,690,664.4 72,288.1 136,765.0

Domestic (Rs. 000) 100% 1,925,668.9 72% 72,288.1 100% 136,765.0 100%

Foreign (Rs. 000) 0% 764,995.5 28% - -

*provisional up to 30-Aug-2012

15 Thailand1 ThaiBMA From January 2012 to July 2012, foreign investors account for 20% of total outright trading value between

Dealers to Client. In term of bond holding as of the end of July 2012, foreign investors accounted for 8% of

total outstanding value of Thai bond market or by 626,334 million baht.

Remark: D2C =Dealer to Client

16 Thailand2 ASCO Monthly average from Feb-July 2012 approx. 20%

17 Turkey TSPAKB In Turkey, banks generated around 94% of bonds and bills transactions totally both in exchange and OTC

market in 1Q2012. The table shows only the brokerage firms‟ transactions breakdown.

Investor Breakdown of the Bonds & Bills Trading

Volume (Exchange+OTC Market) of Brokerage

Firms

2010 2011 2012/03

Domestic Total 94.8% 91.3% 91.5%

Domestic Individual 5.3% 4.1% 4.3%

Domestic Corporation 37.8% 24.9% 16.9%

Domestic Institutional 51.7% 62.4% 70.3%

Foreign Total 5.2% 8.7% 8.5%

Foreign Individual 0.2% 0.2% 0.4%

Foreign Corporation 5.0% 8.5% 8.1%

Foreign Institutional 0.0% 0.0% 0.0%

42

Source: TSPAKB

Foreign investors‟ bond trading through brokerage firms is quite limited with a 9% share in 2012/03.

These investors prefer to trade bonds through banks rather than brokerage firms.

18 UAE (DIFC) DFSA A large number of Sukuk (Islamic bonds) are admitted to the Official List of the DFSA. A list of such

Sukuk is provided below. However the trading of such Islamic bonds takes place OTC and currently does

not require reporting to the DFSA.

Issuer Type Date of Admission

DEWA Funding Limited Sukuk June 18th, 2008

DP World Sukuk Limited Sukuk July 3rd, 2007

EmaarSukuk Limited Sukuk July 19th, 2012

GE Capital Sukuk Ltd. Sukuk December 10th, 2009

HilalSukuk Company Sukuk November 4th, 2009

JAFZ Sukuk (2019) Limited Sukuk June 20th, 2012

Paka Capital Limited Sukuk May 20th, 2008

RAK Capital Sukuk August 21st, 2008

Tamweel Funding Limited Sukuk April 2nd, 2008

TamweelSukuk Limited Sukuk July 29th, 2008

19 Vietnam VBMA Share of Foreign Investors in the Bond Trading on HNX are 25.4% (from 09/24/12 to 09/28/12) and 17.6%

(from 10/01/12 to 10/05/12)

43

IV –4. Settlement and Clearing Systems for Securities Transaction (for Stocks, Bond, Derivatives Respectively)

No. Country Name of

Organization

Settlement and Clearing Systems for Securities Transaction

1 Cambodia SECC n Cambodia, the Securities Clearing and Settlement Facility are provided by Cambodia Securities

Exchange (CSX) under the SECC. The securities transactions are settled T+2 through the CSX.

2 China SAC Securities Law of the People's Republic of China stipulates that the securities registration and settlement

institution is a non-profit institution providing centralized registration for securities transactions, custody

and settlement services. Securities registration and settlement takes unified national operation mode and

the securities registration and settlement institution shall establish central securities settlement accounts

and capital settlement accounts.

As offering net amount settlement services to securities transactions, it should require the participants to

deliver the securities and funds in full-amount and provide delivery guarantees in accordance with the

principle of equivalence on money and goods. The various types of settlement funds and securities

collected by the securities registration and settlement institution under business rules must be deposited

in special accounts of settlement and delivery, which only be used for settlement of securities transactions

in accordance with business rules.

Securities Registration and Settlement Management Measures stipulates that the securities companies

which participate in the centralizing clearance and settlement of securities must apply for the clearance

qualification, sign an agreement with securities registration and settlement institutions and definite the

rights and obligations to both sides. Securities registration and settlement institution shall select the

qualified commercial banks as settlement banks for funds pay business.

The settlement on securities and capital practices settlement classification. If the clearance result is

wrong caused by securities registration and settlement institution, settlement participants can ask for

collection by the securities registration and settlement institution after performing settlement obligations

and undertaking the losses suffered by settlement participants.

3 India ANMI The Indian settlement system works under the T+2 compulsory „rolling-settlement cycle‟ i.e. transaction

on the trade day are settled on the second business day after the trade day. India has two Clearing

Corporations; the National Securities Clearing Corporation (NSCCL) organized by the National Stock

Exchange and the Bank of India Services Limited (BOISL) set up by the Bombay Stock Exchange.

In case the settlement is not completed on T + 2 day, the shares are auctioned. The auction is done on T + 3

day and auction payout is done on T + 4 day. The auction standard will be T + 1 day price for NSE and T

day price for BSE. Default in auction payout then the closing out price would be 20% higher than the

standard auction price.

All trades on the exchange platform are in the dematerialized form. There are two Depositories in Indiaviz

the National Securities Depository Limited (NSDL) organized by the National Stock Exchange and the

Central Depository Services Limited (CDSL) set up by the Bombay Stock Exchange. Final settlement of

trades takes place on the depositories in the book entry format.

Trade Guarantee Fund: - SEBI requires the exchanges to have a system of guaranteeing settlement of

trades or set up a Clearing Corporation to take up counter party risk to ensure that payment default by

the members does not disturb the market equilibrium.

4 Indonesia APEI In Indonesia, settlement, custodian and clearing of securities transactions in the exchange are handled by

the Indonesian Central Securities Depository (KSEI) and the Indonesian Clearing and Guarantee

Corporation (KPEI).

KSEI involvement :

As a Central Securities Depository Institution (CSD), in accordance with Law No.8 of the year 1995 on the

Capital Market (UUPM), KSEI was established for the purpose of providing orderly, appropriate, and

efficient Central Securities Depository and Transaction Settlement services.

In order to operate as Central Depository and provide orderly, appropriate, and efficient settlement

services, KSEI has prepared a dependable and secure system known as C-BEST (The Central Depository

and Book-Entry Settlement System).

KPEI differentiate its clearing system based on products transaction, they are:

1. Settlement and Clearing System for Equity: Electronic Clearing and Guarantee System

(e-CLEARS).

The on-line system which is owned and operated by KPEI to support the clearing and stock

exchange settlement guarantee process in appropriate, regulated, efficient. All clearing and equity

transaction settlement guarantee activities consist of stock exchange validation, netting, novation,

positioning, up to reporting process which is done through e-CLEARS@ system. This web-based

system connects KPEI, Clearing Members and the CustodianCenter online.

2. Settlement and Clearing System for Bonds : Electronic Bonds Clearing System (e-BOCS)

44

The system to settle the corporate and retail bonds transaction in Indonesian Stock Exchange that

involves the Custodian Bank as one of the proactive party over the confirmation and affirmation

process of the bonds transaction data. This clearing mechanism shortens the settlement over bonds

obligation and also increases the efficiency

3. Settlement and Clearing System for Derivatives : Risk Monitoring On-line (R-MOL)

T The system is developed by KPEI to support clearing and Futures Index (FI) derivative transaction

settlement process. This system combines the client-server and web-base technology to manage all

clearing process, transactions settlement, administration and reporting up to FI transaction. This

system enables the data interfacing between KPEI, Indonesian Stock Exchange, CM, and

Payment Bank without manual intervention

5 Japan JSDA In Japan, the settlement services for securities transactions are provided mainly by Japan Securities

Depository Center, Inc. (JASDEC). Its services consist of the registration of securities, settlement by

book-entry transfer of securities, custody and its related operations such as general shareholders

notification, conversion agency service (CB), dividend payments and proxy services for foreign stocks. In

addition to those services, JASDEC provides settlement matching services, and pre-settlement matching

services.

On the other hand, Japan Securities Clearing Corporation (JSCC) provides clearing services such as

obligation assumption, netting of cash securities positions, settlement instruction to CSDs/Settlement

Banks for securities/cash, and settlement guarantees

In Japan, the settlement period for stock transactions is T+3.

The Bank of Japan settles JGB transactions.

6 Kazakhstan FSC I In Kazakhstan, the settlement services for securities transactions are provided mainly by the Central

depositary.

The main functions of Central depositary are as follows:

- render to deponents services associated with the nominal holding of financial instruments;

- carry out settlements in financial instruments in relation to transactions concluded in the organized

securities market and in relation to transactions concluded in the over-the-counter market with the

participation of its deponents (between deponents themselves; between a deponent on the one hand and

a client of another deponent on the other hand; between clients of two different deponents), as well as

other persons carrying out broker and (or) dealer activities without an appropriate license in accordance

with legislative acts of the Republic of Kazakhstan;

- carry out depository services with regard to state securities in accordance with the Republic of

Kazakhstan legislation and its compendium of rules;

- render consultative, information services and other types of services not contradicting the Republic of

Kazakhstan legislation;

- clearing functions.

7 Laos SECO The settlement and clearing services for securities transactions in the Lao PDR is provided by the Lao

Securities Exchange. Its services includes registration and depository of securities, transferring securities

ownership to the holders, clearing and settlement relating to securities transactions and other services

relating to the distribution of dividends and the request of organizing the shareholders‟ meeting upon the

request of public companies and issuers.

The settlement period for stock transactions in the Lao PDR is T+2.

Trading, Clearing and Settlement Flow Chart

45

8 Malaysia ASCM The settlement services for securities transactions are provided by Bursa Malaysia Depository. Its services

consist of the registration of securities, settlement by book-entry transfer of securities, custody and its

related operations such as general shareholders notification, electronic dividend payments, electronic

share application and provision of depositors‟ records service. In Malaysia, the settlement period for

securities transaction is T+3.

On the other hand, Bursa Malaysia Securities Clearing and Bursa Malaysia Derivatives Clearing provide

clearing services for securities and derivatives transaction respectively. The clearing services include

netting of cash/asset positions, settlement instruction to settlement banks for asset/cash, and settlement

guarantees.

Government and corporate bonds are settled and cleared at the Central Bank‟s Real Time Electronic

Transfer of Funds and Securities (RENTAS) settlement system.

9 Mongolia MASD Settlement and Clearing systems make transactions for stocks and bonds under instruction of cash trading by

Mongolian Stock Exchange. There has no derivatives

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP The clearing and settlement function is centralized at the National Clearing Company (NCCPL) which

provides for integrated settlement of trades executed at the stock exchanges in dematerialized shares. All

stock, debt and derivative transactions are cleared and settled through NCCPL.

Both exchange and non-exchange trades and transactions are settled by the National Clearing and

Settlement System (NCSS) under Balance Order Multilateral Netting with T+2 and T+1 settlement cycle.

The Company also facilitates cross exchange netting, provides broker-to-broker delivery system to

facilitate arbitrage transactions, institutional delivery system facilitating direct settlement of

institutional trades, margin financing and margin trading modules and registration of Unique

Identification Numbers (UINs). Netting of Future Market (Derivative) Transactions with Regular Market

Trades is also carried out at NCCPL. Clearing and settlement of net buy or net sell positions of Clearing

Members takes place in each security at the end of the Future Contract Period.

Recently a Negotiated Deal Reporting System has been introduced at the stock exchanges whereby

reporting of off-market transactions for both debt and equity market segments is being done on real-time

basis. To enhance transparency and minimize the potential misuse of the negotiated deal market, all

transactions carried out through negotiated deals functionality are also being settled through the NCCPL.

12 Philippines CMIC The Securities Clearing Corporation of the Philippines or SCCP, a wholly-owned subsidiary of the

Philippine Stock Exchange, has been established to ensure the orderly settlement of equity trades

executed at the Exchange. SCCP acts as a central counterparty; thus, it guarantees the settlement of all

Philippine Stock Exchange trades up to the extent of its Clearing and Trade Guaranty Fund (CTGF).

Clearing members are limited to the trading Participants of the Philippine Stock Exchange.

The settlement period is T+3; purchases by a customer in a cash account shall be paid in full within three

(3) business days after the trade date.

13 Romania RSBA In Romania, the settlement services for securities transaction are provided by the Central Depository. The

institution also ensures clearing services and keeping records of the issuers‟ registries. Central Depository

is a share holding company, member of BSE group.

Since February 2008, Central Depositary provided an extended range of settlement and value added

services for multi-country securities and multiple asset classes. The new borrowing and lending service,

developed under the Global Master Securities Lending Agreement, for both fixed income and equities,

minimizes the settlement risk and responds to clients‟ changing business models. Central Depositary is

the only Central and Eastern European central securities depository which is leading the first migration

wave to TARGET2 Securities.

46

Central Depository is the sole Romanian institution authorized to allocate and administrate ISIN

(International Securities Identification Number) and CFI (Classification of Financial Instruments) codes

according to ISO standards (International Organization of Standardization)

The settlement period for the stock transactions is T+3.

14 Sri Lanka SEC Central Depository Systems (Pvt.) Limited (hereinafter referred to as the “CDS”) is the Clearing House in

Sri Lanka and is a fully-owned subsidiary of the CSE. The CDS provides depository facilities and clearing

services for securities traded on the Colombo Stock Exchange. It also provides a safe keeping facility and

an electronic record of all listed securities that are dematerialised.In Sri Lanka settlement period for stock

transactions is T+3.There are four banks that act as settlement Banks of the CDS.

15 Thailand1 ThaiBMA Stock

Clearing and settlement of stock exchange transactions are centralized at Thailand Securities Depository

Co. (TSD) and Thailand Clearing House Co.(TCH), subsidiaries of the Stock Exchange of Thailand (SET),

and DVP with net settlement are used for stocks. Stock settlement convention is T+3.

Bond

In Thailand, clearing and settlement of bond transactions are centralized at Thailand Securities

Depository Co. (TSD), a subsidiary of the Stock Exchange of Thailand (SET). The Bank of Thailand (BOT)

acts as the registrar for government bonds and is responsible for the operation of BAHTNET, a high value

transaction clearing network. Clearing and settlement of government transactions are done on DVP and

real time gross settlement basis (RTGS). Bond Settlement convention is T+2 but can be varied upon

counterparty agreement.

Derivatives

Exchanged traded derivatives are listed and traded on the Thailand Futures Exchange Co. (TFEX), a

subsidiary of the Stock Exchange of Thailand.Clearing and settlement of these derivatives transaction are

done through Thailand Clearing House Co., Ltd. ( TCH), also a subsidiary of the Stock Exchange of

Thailand. The clearinghouse provides a range of services related to the registering, clearing and settling of

transactions executed on the exchange, the guaranteeing of contracts and the managing of risks of its

members. The most important role of the clearinghouse is to serve as counterparty to every transaction.

16 Thailand2 ASCO Stock and Derivative products are settlement and clearing by cash and margin loan via Thailand Clearing

House (TCH)

17 Turkey TSPAKB In Turkey, while Takasbank is responsible for settlement and clearing services, Central Registry Agency

serves as the central depository for the dematerialized capital markets instruments.

Takasbank is a specialized bank dedicated to securities services in Turkey. In addition to settlement and

clearing services, Takasbank acts as the central counterparty and clearing house for the Turkish

Derivatives Exchange and operates the Takasbank Money Market, an OTC market where ISE members

can lend and borrow funds.

The Central Registry Agency Inc. (CRA) is the only central depository for all dematerialized capital

market instruments. It was established in 2001 as a private company. The dematerialization process was

completed in 2006 for equities and in 2007 for mutual funds and corporate bonds. The main functions of

the CRA are to dematerialize and register capital market instruments and the rights attached in

electronic form, with respect to issuers, intermediary institutions and rights holders, and manage the

Investors‟ Protection Fund (IPF). The IPF was established in 2001 to cover the obligations to investors of

bankrupt brokerage firms and banks, with respect to equity transactions.

Equities

The settlement of equities and cash is done on T+2 by Takasbank, through delivery-versus-payment

(DVP) system. The securities settlement operations are carried out via Takasbank Settlement Pool

Account with the Central Registry Agency (CRA). CRA and Takasbank systems are fully interlinked in

real time, so securities transfers are reflected in the CRA instantaneously. Settlement is realized along

with the details transferred from the CRA.

The custody accounts are held with the CRA. Intermediaries have a settlement pool account besides their

own portfolio account and client sub-accounts. The cash accounts are held at Takasbank.

At the end of each trading day, ISE transmits details of all transactions to Takasbank. Takasbank

multilaterally nets the settlement positions, determines the obligations of each broker in each security,

and calculates their net cash position.

The net settlement position on client basis is transmitted to CRA on the trade day (T). Details of netting

are available to brokers electronically on T, showing also settlement amounts due. At the end of the day,

the securities of the delivering clients are blocked automatically by the CRA for settlement purposes.

On T+1, net settlement records that are checked by the CRA are made available to brokers electronically.

On T+2, the securities of the delivering clients are transferred from the blocked settlement account to the

settlement pool account of the broker within the CRA system. Securities are transferred to client

sub-accounts by the CRA.

Bonds & Bills

Clearing and settlement is handled by Takasbank. The settlement date for transactions is T+0, unless

otherwise agreed between the parties. On the other hand, for the foreign currency denominated securities,

settlement date is T+3.

The settlement of government debt securities traded in the organized and OTC markets are done through

the Electronic Securities Transfer System operated by the Central Bank. Takasbank has a securities

account with the CBRT in order to facilitate the settlement of government debt securities.

47

After a trade, the ISE issues confirmations to both parties and to Takasbank. Takasbank multilaterally

nets all trades for each ISE member for each security traded and for cash. Netting results are reported to

the members electronically on trade day. Only trades done before 14:00 hrs can be settled on the same day.

Derivatives

The clearing and settlement of transactions are executed mostly on a cash settlement basis. TurkDex

introduced physical delivery for currency contracts in 2009 and for live cattle contracts introduced for the

Feast of Sacrifice in 2011.

Takasbank acts as the central counterparty and guarantees the settlement of transactions. But the

guarantee is limited to the collateral taken from the members and the size of the guarantee fund.

Trades are executed on a client account basis, which means that margins are also monitored on account

basis. However, although the margins are followed on account basis, clearing members are responsible for

the margin calls.

Everyday, after the announcement of daily settlement prices of contracts by TurkDex, Takasbank starts

marking-to-market on account basis. If the collateral falls below the maintenance margin, a margin call is

announced by Takasbank. If the collateral is above the maintenance margin in an account, but the cash

margin is negative after the losses are deducted from the cash collateral, the relevant member shall be

required to compensate for the negative balance by a margin call. While daily losses are deducted from the

cash collateral on the same day (T+0), profits are added to the cash collateral on the following day (T+1).

18 UAE (DIFC) DFSA The DIFC has 2 exchanges, Dubai Mercantile Exchange (DME) and NASDAQ Dubai. The rest of the

United Arab Emirates has 3 exchanges, Abu Dhabi Securities Exchange (ADX), Dubai Financial Market

(DFM), and Dubai Gold and Commodities Exchange (DGCX). DFSA regulates DME and NASDAQ Dubai

as they are established in the DIFC. The legal and regulatory environment of the DIFC exchanges is

aligned to meet international best practice. NASDAQ Dubai was licensed from in Sept 2005 for the

financial service of operating and exchange and operating a clearing house in respect of shares,

debentures, warrants, certificates, units, rights in those investments, designated investments, options

(but not on commodities) and futures (but not on commodities). DME was licensed in April 2007 for the

financial services of operating an exchange in respect of commodity derivatives.

Following the consolidation with DFM on 11th July, 2010, NASDAQ Dubai has outsourced its trading,

clearing, settlement and custody functions for equities to DFM. Trades, for instance, have moved from a

T+3 to a T+2 settlement cycle of DFM, whilst settlement timings have also changed in line with DFM.

Trading hours of NASDAQ Dubai for the equity market from Sunday to Thursday are now from 10.00 to

14.00 for continuous trading whilst the pre opening auction period is from 9.30 to 9.55. In terms of

clearing, NASDAQ Dubai remains the central counterparty (CCP) for the clearing and settlement of

trades in NASDAQ Dubai equities to the extent that if there is a payment default, the bank guarantee

defaults, CCP will meet the obligations of its member.

DME lists the DME Oman Crude Oil Futures Contract, which is an exchange traded contract for crude oil

price transparency in the east of Suez crude markets. Additionally, DME lists the DME Oman Crude Oil

Financial Contract, which is settled with reference to the benchmark DME Oman Crude Oil Futures

contract. All trades executed on the DME are cleared through and guaranteed by the CME Group, which is

regulated by the U.S. Commodity Futures Trading Commission (CFTC). DME markets trade

electronically, opening at 1800 (EST) and closing 1715 (EST) the next day, Sunday to Friday to mirror the

trading hours for NYMEX products on CME Globex.

19 Vietnam VBMA The HNX has the “Electronic Bond Trading” system or EBT, which is a modernized and advanced

alternative in bond trading. EBT allows only members of HNX to enter the trading bonds by EBT

system. This system is very convenient and efficient that can facilitate electronic negotiation, payment

by BIDV and settlement by VSD.

Bond-Trading operation process as in Timely Basis

Transaction or dealing date (T-n)

Front office negotiates and makes deals with counterparty.

Back office verifies deals with internal front office, confirms deal with counterparty, and

sends payment to BIDV as for ensuring cash availability or checks with VSD to make sure that

bonds are available for selling.

Transactions, confirmation could be done within the same day as trading date (T) or up

to a week before trading date (that is “n” could be a number from zero to 7) or even longer

period sometimes. Note that the larger number of n means that there could be more risk in

settlement if the bond market is very volatile.

Trade date (T)

Back office key in dealing details, as put through, into the Electronic bond trading

system (EBT).

Settlement date (T+ 1)

The EBT will automatically notify the BIDV and VSD to make the payment and transfer

securities.

Processing timing for bond dealing, confirmation, payment, and settlement depends on agreement among

the parties and has to be done within office hours of three main organizations, i.e., HNX, BIDV and VSD,

which are summarized in the following table, and before entering deals into the EBT system to prevent a

failed settlement.

48

Trading Date T Payment date: T+1 Settlement date: T+1

Morning Working Time 8:30 am - 11:30 am

Afternoon Working Time 13:30 pm - 17:00 pm

Organizations involving in Bond Trading in Exchange

Trading Time 8:30 am - 11:00 am

Hanoi Stock Exchange (HNX) Vietnam Security Depository (VSD)BIDV for Cash Payment

Working Time 8:30 am - 16:00 pm

Duties:

Electronic Bond Trading (EBT)

Duties:

Securities Registration and Depository

Securities Clearing and Settlement

Duties:

Cash settlement or payment

49

IV –5. Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.)

No. Country Name of

Organization

Current Status of Off-Exchange Transaction (including PTS, ATS, MTF, etc.)

1 Cambodia SECC n/a

2 China SAC At present, China‟s equity markets with the features and functions of OTC are consisted of Agency Share

Transfer System and Regional Markets of Property Right Transaction. CSRC is committed to developing

the Agency Share Transfer System into a national and unified OTC market under the supervision of

CSRC.

At present, The number of regional markets of property right transaction has more than 200. The regional

markets were established by the functional departments of local government to meet the demand for the

state-owned enterprise reform and the stated-owned assets transformation in the transition process from

planned economy to market economy. The regional markets have played a positive role in solving the

transfer of stated-owned assets, restructuring and financing, etc.

As a large number of state-owned capital exited in competitive fields, the trading volume of state-owned

property right has reduced tremendously. Meanwhile, the multi-level capital market system is imperfect,

the demands of small business finance and the property rights transfer are unmet, in these case, a lot of

regional markets of property right transaction expand there services to small and medium enterprises.

The regional markets provide listing platform to meet the demand of equity transaction, and other

financing services.

Currently, the function definition on the regional markets of property right transaction is unclear. The

markets lack of legal basis and a good monitoring mechanism. It is difficult to unite the scattered markets

throughout the country. Because of the above reasons, it is difficult to form a unified national OTC market

based on the regional markets.

In July 2001, approved by CSRC, Agency Share Transfer System (hereinafter referred to as “Agency

System”) was set up to solve the historical issues. Agency System is under self-regulation by SAC.

In 2002, Agency System began to provide service of share transfer for delisting companies.

To support the development of high-tech enterprises, in January 2006, Agency System began to provide

service of share transfer by quotation for the non-listed limited companies registered in Zhongguancun

Science Park.

By the end of June 2012, Agency System has 176 listing companies totally, including 8 companies from STAQ and NET,

44 delisting companies, and 124 quoted companies from Zhongguancun Science Park. 64 security companies have

licences in Agency System. Cumulative trading volume over the previous years is 8.8 billion shares, value of all trading is

19 billion Yuan.

3 India ANMI Off-Exchange transactions are few in number. Such transactions take place directly between the two

parties who give direct instructions to the Depositories to conduct the transactions. These transactions

mainly take place in case of an open offer or takeover of a company. Such transactions do not require

reporting to the exchange.

In case the off-exchange transaction is executed through a registered stockbroker on a

principal-to-principal basis, the stockbroker must report such transactions to the Exchanges.

4 Indonesia APEI Bond trading in Indonesia is mostly on the Over The Counter (OTC) basis. All OTC trading is requiring

reporting to Indonesia Stock Exchange (IDX) through Central Trading Platform (CTP) within 30 minutes.

5 Japan JSDA Since the 1998 abolishment of the obligation to trade stocks on exchanges in Japan, off-exchange

transactions have been gradually increasing.

However, in Japan, unlike US and European market, most stock orders are still executed through the

stock exchanges and market fragmentation is not so notable.

Having said that, the PTS (proprietary trading system) operators are gradually entering the Japanese

market as order placement through DMA, algorithm trading, etc. grow.

＜PTS Operating Companies: 2＞

Company

Name

Started

PTS

Pricing

Method

Transaction

Time

Target

Customer Remarks

SBI apan

Next

Securities

Aug 20,

2007

Order

Matching

Method

8:20～16:00

19:00～23:59

Individual investors,

Institutional

investors

Continuous Matching of Limited

Orders, in principle, on the basis

of closing price on exchange, Price

movements are limited by daily

price range

Chi-X

Japan

July 29,

2010

Or e

Matching

Method

8:00～16:00 Institutional

investors, Securities

companies

Continuous Matching of

Limited Orders, in principle,

on the basisof latest trading

price on exchange, Price

movements are limited by

daily pri e range

50

取引所金融商品市場外での売買等に係る売買代金の推移

199,649 159,720 159,389 211,498 273,024396,858

505,945425,656

238,438 226,413 268,367

405 1,568 1,016 1,160 2,279 7,247 19,521 21,487 29,928 31,356105,911

2,252,3872,092,294

2,553,421

3,572,861

5,347,742

7,256,882

7,951,186

6,054,098

3,902,2463,754,677

3,188,598

8.86%

7.63%

6.24% 5.92%

5.11%

5.47%

6.36%

7.03%

6.11% 6.03%

8.42%

0.02%0.07% 0.04% 0.03% 0.04% 0.1%

0.25%0.35%

0.77% 0.84%

3.32%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2001年 2002年 2003年 2004年 2005年 2006年 2007年 2008年 2009年 2010年 2011年

取引所外取引(A)

ＰＴＳ取引（(A)の内数）(B)

取引所取引(C)

取引所取引に対する取引所外取引の割合(A/C)

取引所取引に対するＰＴＳ取引の割合(B/C)

（割合：％）（売買代金：億円）

注）「取引所取引」の状況は、東証統計月報を参考に作成。（１月～10月）

6 Kazakhstan FSC As an emerging markets country, Kazakhstan just on the way to develop market relationships, including

stock market operations and Other-The-Counter (OTC) financial instruments. Currently, there are no

direct rules or instructions regulating Over-The-Counter (OTC) operations, as well as ATS (Alternative

trading system) and MTF (Multilateral Trading Facility). In most cases, professional members of stock

market prefer to operate with traditional trading systems in the centralized securities exchange market

operated by a stock exchange.

7 Laos SECO Not applicable

8 Malaysia ASCM Equities and derivatives transactions in Malaysia are traded on the Exchange.

Unlisted debt securities are however traded over the counter and most of the debt securities available in

the market are unlisted.

The Electronic Trading Platform (ETP) operated by the Central Bank facilitates over thecounter trading

transactions. ETP is a centralized database on Malaysian government and corporate debt securities that is

integrated with Fully Automated System for Issuing/Tendering (FAST). ETP provides information on

terms of issue, real-time prices, details of trades done, and supplies relevant news on debt securities

issued by both the government and the private sector.

9 Mongolia MASD Currently in Mongolia there is no such type of transaction.

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP During the period from March 1, 2012 to August 31, 2012, off exchange transaction volume was equivalent

to 16.3% of the Ready Market Trading volume of the Karachi Stock Exchange which is the largest (volume

wise) stock exchange of Pakistan.

12 Philippines CMIC In the Philippines, most stock transactions are still executed through the stock exchange due to the lower

transaction cost relative to OTC transactions.

13 Romania RSBA In 2010, the first company was listed on the ATS market. Last month there were 25 company listed.

In Romania there are no financial instrument traded outside the stock exchange.

(Source: Bucharest Stock Exchange)

TradingAmount regarding the Off-Exchange Trading

(Trading Amounts: 100 Mil.Yen)

Off-Exchange Trading (A)

PTS Trading (within (A))(B)

On Exchange Trading (C)

Share of Off-Exchange against On-Exchange (A/C)

Share of PTS against On-Exchange (B/C)

(Note) Data on “On-Exchange Trading” is compiled in reference to TSE Monthly Report.

51

14 Sri Lanka SEC In terms of Section 28 (1) of the SEC Act “no person holding securities ina public company listed in a

licensed stock exchange shall without the prior approval of the Commission buy, sell, gift or otherwise deal

in such securities except in compliance with trading procedure adopted by such licensed stock exchange”.

The transfers outside the trading floor include : gifting of shares, restructuring of entities (share swaps,

amalgamations etc.),margin trading and financial facilities, employee share option schemes, Takeovers

and Mergers Code transactions (mandatory offers/voluntary offers), correction of data entry errors, change

of custodian, qualifying shares, de-listings, and single to joint CDS account/ joint to single CDS account

transfers.

15 Thailand1 ThaiBMA Bond trading in Thailand is mostly on the over-the-counter (OTC) basis. Although an electronic trading

platform is offered by the Stock exchange to be an alternative for trading, it accounts for only less than 5%

of total trading.

Inter-dealer trading is actively done through voice box from the two main inter-dealer brokers.

All trading (no matter where it takes place) is required to report to ThaiBMA within 30 minutes. ThaiBMA

then disseminates these executed transactions to the market to provide for intraday market movement

information.

16 Thailand2 ASCO n/a

17 Turkey TSPAKB According to the Article 55 of the “Regulations Pertaining to the Foundation of Stock Exchanges and their

Principles of Operation”, the buying and selling of listed stocks and/or securities on the exchange is the

main rule. However, upon the proposal of the relevant exchange and the necessary arrangements by the

CMB, authorization may be granted for off-exchange trading. Unless an exception has been made to such

trading, exchange members cannot trade securities of their customers‟ off-exchange.

Currently; intermediaries must trade equities, rights coupons and exchange-traded funds, and the

derivatives based on equities or the equity indices on the exchanges.

However, they can trade bonds & bills and derivatives based on assets other than equities or equity

indices off-exchange, with the obligation to register off-exchange transactions to the ISE. Registration fee

for off-exchange transaction is higher compared to the exchange traded ones.

18 UAE (DIFC) DFSA Securities listed on NASDAQ Dubai can also be traded over the counter, (OTC).

The activity of operating an alternative trading system (ATS)is considered a financial services activity

that could only be carried on by an Authorised Firm in the DIFC. As an Authorised Firm an ATS

provider will have to comply with the regulation such as standards for applicants, requirements on

conduct of business, systems and controls, monitoring, etc. However, there is no ATS which is operating

at the moment in the DIFC.

19 Vietnam VBMA n/a

52

IV –6. Share of On-line Trading

No. Country Name of

Organization

Share of On-line Trading

1 Cambodia SECC n/a

2 China SAC In March 2000, CSRC promulgated “Interim Measures for Online Securities Commission” to regulate and

promote the development of online transactions. Subsequently, the development of online trading system

is very fast.

By 2006, the volume of transactions conducted via the Internet reached more than 40%. The proportion

has already been averagely more than 70% at present, much higher securities companies reached more

than 90%. On-line trading becomes the main trade way now.

3 India ANMI All transactions in India take place online through the exchanges. There is no floor trading in India. The

exchanges offer connectivity to its trading members through V-SAT connectivity or through leased lines.

The members in turn extend connectivity to trading terminals across India through computer-to-computer

links (CTCL) again through V-SAT connectivity or through leased lines. The broker using his computer

link directly executes transactions on the exchange.

Besides Brokers are permitted to offer internet based trading to their clients. Securities and Exchange

Board of India (SEBI) in August granted the brokers registered with SEBI to provide Internet-based

trading are eligible to provide securities trading using wireless technology (Mobile based trading). This is

the next push forward to encourage increased retail participation and has started in India.

4 Indonesia APEI Currently, around 61 brokerage houses (around 53% of all the 114 brokerage houses in Indonesia) offer

On-Line Trading System for their investors.

5 Japan JSDA Japan has witnessed a rapid increase in the number of Internet users and the PC market penetration rate

since the latter half of the 1990s. In addition, in October 1999, the Japanese stock market entered a new

era of complete liberalization of commissions and fees in the stock brokerage business. And these two

factors have led to the birth of online brokers in Japan.

Since then, competition among online brokers has been severe. Most of them cut commissions and fees in

stock trading significantly to increase their customer base. In October 1999, there were around 300,000

internet brokerage accounts in Japan, but by March 2012, this number had reached 17.5 million accounts.

Sept.2010 Mar.2011 Sept.2011 Mar.2012

Number of member firms

engaged in Internet trading

52 52 51 60

Number of Accounts 16,078,857 16,468,789 16,959,034 17,569,423

Stock Trading Amounts (million

Yen)

61,352,320 66,997,116 56,640,256 55,877,996

6 Kazakhstan FSC In Kazakhstan stock exchange transactions can be made by using electronic trading platforms, also

through written orders or telephone calls. Unfortunately, there is no official statistics of online-trading.

Moreover, the share of individual investors which able to trade via internet, is very tiny, against

institutional investors (banks, pension funds, investment companies etc.). Also, there is no floor trading in

Kazakhstan, considering the fact that professional members of Kazakhstan Stock Exchange (KASE)

operates through the electronic trading platform.

7 Laos SECO Currently, the LSX is in the process of developing a system for on-line trading, namely Home Trading

System (HTS). The HTS is expected to be launching by 2013.

8 Malaysia ASCM Since the advent of online trading in Malaysia, the growth has been steadily increasing.

Currently, online trading contributes to about 17% of the total trades executed through Bursa Malaysia. It

was also reported that 18% to 21% of total retail transactions were performed through online broking.

9 Mongolia MASD Currently in Mongolia there are no online broker and dealer trading.

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP Figure not available

12 Philippines CMIC As provided by the Philippine Stock Exchange, the share of on-line trading, as per available records, is

6.86% of total value turnover.

13 Romani RSBA In Romania, the entire trading system is on-line but is performed mostly by the employees of the securities

companies. In the last years, though, almost half of the Romanian securities companies have developed

on-line trading systems for their clients.

14 Sri Lanka SEC At present 27 broker firms provide internet trading facilities for investors. Internet trading is still not very

popular among investors.

15 Thailand1 ThaiBMA Electronic trading platform for bond market which offered by the Stock Exchange of Thailand, it accounts

for less than 5% of total trading. Some traders use messaging likes Reuters, Bloomberg but they still have

to confirm just like OTC.

16 Thailand2 ASCO Approximately 25% of total trading value.

17 Turkey TSPAKB

Internet Transactions of Brokerage Firms

2010 2011 2012/03

Equities

No. of Active Internet Investors 297,486 383,732 213,165

No. of Trades 39,954,028 54,984,643 12,492,438

Internet Trading Volume (US$ 1.000) 169,732,386 228,764,939 53,109,924

Bonds and Bills

53

No. of Active Internet Investors 240 173 67

No. of Trades 1,540 1,095 279

Internet Trading Volume (US$ 1.000) 16,671 9,508 1,055

Futures

No. of Active Internet Investors 4,236 7,453 4,816

No. of Trades 4,917,918 8,373,941 1,672,745

Internet Trading Volume (US$ 1.000) 177,853,806 189,230,836 51,166,354

Warrants

No. of Active Internet Investors 457 7,775 3,968

No. of Trades 31,435 1,050,479 290,621

Internet Trading Volume (US$ 1.000) 64,772 1,388,935 518,779

Leveraged FX Trading

No. of Active Internet Investors - 1,663 4,621

No. of Trades - 544,170 380,538

Internet Trading Volume (US$ 1.000) - 47,041,176 85,004,021

Source: TSPAKB

In Turkey, brokerage firms are allowed to trade in each type of markets. On the other hand, while

derivatives brokerage firm can trade only in futures market, banks are allowed to trade both in futures

and bonds & bills markets. The table shows the only the brokerage firms‟ (including derivatives brokerage

firms) transactions. Leveraged FX trading can be done by brokerage firms only.

nternet transactions in the market have an increasing share in total. While the share of the internet

transactions in equities was 0.2% in 1999, it reached to 24% at the end of the 2012/03, indicating a historic

high level.

Internet trading‟s share in the derivatives exchange rose from 5% in 2006, to 40% at the end of the

2012/03, and online trading became the major channel for futures transactions.

Leveraged FX trading has been regulated by the CMB since 31 August 2011. Internet‟s share in Leveraged

FX trading have reached US$ 85 billion, recording the highest volume among other instruments.

18 UAE (DIFC) DFSA Members of the exchanges are connected electronically to the trading platforms of the exchanges. Orders

to the members can be made either electronically, through voice devices or written instructions. Some

members provide their customers with online trading access.

19 Vietnam VBMA HNX introduced the new electronic system for the auction of government bonds in July 2012.

HNX also introduced an electronic trading system for T-bills in September 2012.

HNX is trying to build the yield curve for Vietnam but this project is still in its early phase

Vietnam Securities Depository now allows „T+3‟ mechanism in stock trading on exchange

54

V. Challenges for Securities and Capital Market

V – 1. Major Recent Incidents and/or Challenges in Securities and Capital Markets as a Whole

No. Country Name of

Organization

Major Recent Incidents and/or Challenges in Securities and Capital Market as a whole

1 Cambodia SECC Most Recent Incidents:

- On 18th April 2012, first trading day at the Cambodia Securities Exchange (CSX)

Challenges in the Securities Market:

- Only one listed company (only one type of share traded on the CSX)

- Low liquidity of the market

- Trading volume is low

- Small amount of local investors

- New market for the country

- Investor Awareness about the complex financial products

- Market risk

- Encouraging other companies come to borrow the fund in market

2 China SAC Major Recent Incidents：

On July 12, 2012, National Development and Reform Committee and Ministry of Finance jointly released the

“Notification on Reduce the Supervision Expense Standard of both Securities and Future Markets”, which stipulated that

CSRC brings the standard of annual transaction fee from 0.04 per thousand down to 0.02 per thousand, and exempts

supervision fee of securities transaction on securities investing fund and bond.

In December 2011, CSRC, PBOC, SAFE jointly released “Trial Measure for Fund Management Companies, Securities

Companies RMB Qualified Foreign Institutional Investors in Domestic Security Investment”.

Challenges:

For a long time, China has formed a financing structure that the indirect financing is predominated,

which leads to enterprise financing excessively dependent on bank credit. It results in the risk of

macro-economic volatility highly concentrated in the banking system.

During 9 years from 2002 to 2010, the fund raised from exchange market of China for Chinese enterprises

is 3.28 trillion Yuan totally, only 8.5% of the increment of bank loan for the same period.

3 India ANMI The Indian Capital/Financial markets have remained subdued during the past few years. The recent

events that have impacted the global financial/stock markets have also impacted the sentiments in India.

The sluggish global economy has also impacted the growth of Indian Economy. The Government of India is

exploring all avenues to provide the required thrust to the economy. A global turnaround for which

concerted efforts are being made by various Countries will accelerate the growth process.

4 Indonesia APEI The main challenge in security market are:

Improvement of the security market, such as: Investor Protection Fund

Misperception of investing in stock market is like a gamble & only for the rich people

Improvement the implementation of continuous settlement, Single Investor ID (SID)

Implementations of separate securities and cash account for each investor

Monitoring system of securities transaction to conform with the Capital Market Rules

Monitoring the compliance of market participants to the prevailing regulations

Development of Straight Through Processing (STP) is one of the projects within the scope of

capital market infrastructure aimed at improving the efficiency of the overall market.

5 Japan JSDA 1. A series of scandals uncovered about Japanese listed companies (i.e. Olympus, Daio Paper, etc.)

having caused severe damage to investor confidence in Japanese capital markets and corporate

governance.

2. Fraud in the solicitation of unlisted stocks and bonds

3. Exposure of a big Ponzi scheme scandal by the Japanese Investment Management Company causing

a huge loss of entrusted pension money

6 Kazakhstan FSC Historically, In Kazakhstan companies of the real sector in financing activities often use banking credit

products against capital market instruments. In that way, one of the biggest problems is a low rate of

listed issuers. Also, the main stock market participants are institutional investors (banks, insurance

companies, pension funds), and the share of retail investors is negligible. Other challenges in securities

market is a low liquidity and a small number of financial instruments (CDS, IRS etc.).

7 Laos SECO 1. Limited choices of products

2. Market is in the early stage of development and still not on the radar screen of international

investors

3. Limited investor base from local, institutional and foreign investors

8 Malaysia ASCM increasing cost of doing business

declining brokerage rate

higher commission sharing with commission-based dealers following liberalization in 2010

low liquidity and dwindling trend of the market volume

Low retail participation

the industry is regulated by the Securities Commission and Bursa Malaysia which acts as the frontline

regulator. The Central Bank has also been actively involved on the regulations of the industry, particularly to

the stockbrokers that are licensed as investment banks. Inevitably, the additional regulatory structures and

the embedded bureaucracies have in some or other ways affected the smoothness of the stockbrokers’

55

business operations.

In tackling these challenges, the ASCM has been engaging the regulators as well as the Government with

appropriate proposals to resolve the issues facing the industry and Malaysian capital market as a whole

9 Mongolia MASD To improve Securities legal environment. Now we are discussing about the draft of new Securities Market

Law including new services and standards such as clearing, custody, investment trust and advisors, and

self-regulatory organizations

To establish new systems for securities trading, clearing, settlement and depository, and online brokerage

and dealing. Management team of London Stock Exchange is helping to develop those systems since

April 2011.

To develop standards and requirements of new services such as clearing and custodian services, trust

services, asset management and advisors.

To disclose information for securities issuers and professional participants and develop information

receiving and delivery infrastructure based on Mongolian Stock Exchange or Financial Regulatory

Commission.

To develop standards of governance of the listed companies and implement them.

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP At present the Pakistani capital market is experiencing a difficult phases of its history owing to a number

of domestic factors and impact of global financial meltdown. Turnover and market capitalization are low

and new listings from good quality corporate houses are finding it difficult to get fully subscribed.

Moreover, lack of investor education is coupled with limited market outreach- investors in the capital

market are mainly concentrated in only two or three major sectors. The total number of registered

investors in capital market is less than 200,000 while number of active investors is even lower.

In recent past, international and domestic volatility in the macro-economy led to a severe liquidity crunch,

along with an exodus of foreign institutional investors leading to sharp decline in the key indices and

erosion of market capitalization. The overall situation dampened the market activity and gave rise to lack

of investor confidence. To cater to the situation, various market stabilization measures were taken but

despite the same, investor confidence and liquidity levels could not be restored fully. A comparison of the

key economic, financial and capital market indicators reveals that the Pakistani capital market has not

fared very well as compared to other regional and international market.

Currently, the major challenges being faced by the Pakistani capital market are summarized below:

Regulatory and Structural Reforms at the Capital Market Institutions and Intermediaries Across the

globe, broad movement towards consolidation and mergers is witnessed. Majority of the stock exchanges

internationally stand demutualized and corporatized with healthy capitalized intermediaries. The pace of

adapting to such global trends has been slow in the Pakistan. Demutualization has been achieved only

recently and the market is now set to cope with post-demutualization challenges. Also, the regulatory

framework of the market infrastructure institutions and capital market needs to be aligned with

internationally acclaimed principles of market regulation.

Increased Investor Education and Market Outreach Greater efforts are required for educating existing

and potential investors about their rights, roles and responsibilities in the changing marketplace.

Targeted awareness campaigns are required for retail investors, policy/decision makers, and pension and

insurance sectors. Expanding market outreach is also a major challenge which can be dealt with by

expanding branch network of market intermediaries, capital market infrastructure institutions and by

making use of technological innovations for targeting geographically remote investor base.

Restoration of Investors‟ Confidence Major initiatives are required to reinforce investor confidence by

improving risk management, governance and transparency and investor protection. Enforcement

mechanisms and compliance processes (surveillance, inspection activities) need to be strengthened.

Review of existing regulatory framework is needed for ensuring good corporate governance and

transparency in the operations and reporting procedures of listed companies.

Image Building of the Capital Market and Institutions To attract foreign investment and to acquaint

international community on the capital market developments and investment prospects in Pakistan,

roundtables and conferences need to be held globally and liaison with foreign counterparts and greater

participation in international forums like IOSCO should be ensured.

Commodity/Currency Market DevelopmentWorld over, commodities markets constitute an important part

of the capital markets. Futures market in the commodity and currency are relatively new in Pakistan and

major initiatives are required to diversify to promote activity ad interest in this market.

12 Philippines CMIC Developments

• In early 2012, the (Philippine) Securities and Exchange Commission, having allowed CMIC to be spun

off into an independent entity, approved the latter‟s application for registration as self-regulatory

organization after it complied with the requirements. On 12 March 2012, the Capital Markets Integrity

Corporation Rules took effect. Under the CMIC Rules, CMIC, among other matters, enforces compliance by

trading participants and, in the proper case, by issuers with the Securities Laws.

• On 27 July 2012, the Philippine Stock Exchange kicked off the celebrations commemorating the

Exchange's 20th anniversary through a traditional bell ringing ceremony. The celebrations will culminate in

December highlighted by the Exchange's first Bell Awards for corporate governance which will recognize

trading participants and listed firms subscribing to high standards of corporate governance.

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Major Challenges

• Investigation of, and penalizing, market manipulators;

• Expansion of local and foreign investors;

• Expansion of listed companies;

• High friction (transaction) costs relative to the neighboring exchanges;

• Public perception as regards the capital markets; and

• Necessity for more products relative to the market and more experienced and qualified personnel from

the securities industry.

13 Romania RSBA The developments in the last few years in the European and international capital markets have put a real

pressure on the Romanian capital market as well as on all the participants. As a consequence, the most

important challenge is convincing the Romanian Government to list the state own companies.

One other challenge is creating a modern Central Counterpart according to the regulations applicable in

the European Union. Also, being a part of the European Union, Romania has to apply all the European

regulations.

14 Sri Lanka SEC Broadening/diversifying the (sound) product range available to investors

The capacity of regulators and market participants need strengthening to meet the challenges and

sophistication that comes with capital market development

Limited menu of enforcement options in relation to insider dealing and share price manipulation;

however the SEC‟s enforcement capacity is being strengthened with the technical assistance of the

World Bank through FIRST Initiative (the Financial Sector Reform and Strengthening Arm of the

World Bank)

Reducing transaction costs and expanding the use of internet trading

15 Thailand1 ThaiBMA 1. Liberalization of securities business by the year 2012. This will create stronger competition in the

business and allow for newcomers. We have started to see some of the non-bank securities companies

either been acquired by bank or been merged among themselves. Many securities companies look for

diversified business income apart from stock trading commission.

2. The issuance of new debt products by government and big corporation, e.g. 50-year government bond,

10-yr government Inflation linked bond, saving bonds distributed by ATM, and 100-yr puttable

corporate bond.

3. Demutualization of Thailand‟s Stock Exchange has been delayed due to change of government.

4. Volatile capital inflow/outflow from foreign investors.

5. Deposit Protection Agency (DPA) postpones its project to reduce Bank deposit coverage to 1 Million

Baht per account per bank due to global financial crisis.

6. Introduction of Gold / Silver futures by the Thailand Futures Exchange

7. “SMEs Bond” project has introduced to promote bond market as another fund raising channel for SME

businesses. Privileges for SMEs Bond project participants such as lower rating fee, discount on

registration and annual fee are offered until the end of 2012.

16 Thailand2 ASCO - Opportunities to develop new financial products to respond to expanding demand of investors, e.g.

infrastructure fund

- Environmental problems and limited energy supply create needs for alternative energy, which is

advantageous to those companies in energy sector.

- Insecurity in global food supply creates cross-border investment between capital-rich countries and

resource-rich countries, as well as needs to develop risk management tools to manage risks from

food price volatility.

- Integration of worldwide financial markets increases needs for regulators to have policies that

facilitates private sector as well as maintains reliability and prudence of regulatory bodies.

- As the number of senior citizen is increasing, capital market should be a source of long-term

investment and introduce investment products suitable for senior citizen, e.g. investment products

with capital protection, etc. Capital market should also help create financial literacy in the

country.

- Market liberalization and AEC puts pressure on securities companies to adapt and prepare for new

competitors.

Regulations

The Capital Markets Board conducted a twinning project with the German BaFIN in 2006-2007. In that

study, Turkish regulations were reviewed and their conformity to European Union regulations was

analyzed. It has been concluded that Turkish regulatory structure is in line with the EU standards to a

large extent. Yet, there are still some amendments to be implemented.

In April 2010, the communiqué regarding public offerings has been amended in view of harmonising with

the EU acquis, and facilitating the IPO process. Within the context of this revision, the main amendment

was the removal of the minimum free float requirement. In addition, the underwriting obligation for

intermediary institutions was lifted. Offerings to qualified investors and equities to be registered for

listing on the Emerging Companies Market, established for SMEs, was also regulated by this new

communiqué.

In July 2010, a series of new regulations, aiming largely at hindering market manipulation were

announced by CMB. CMB classified equities into three groups according to liquidity and free float criteria

and differentiated the trading rules. These measures became effective in October 2010.

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In October 2010, a new regulation regarding the sale of foreign securities was released. This regulation

allowed the IPO of foreign equities and eased existing regulations regarding foreign securities.

In October 2010, the Banking Regulation and Supervision Agency allowed banks to issue TL-denominated

bonds and bills.

On the other hand, in 2011 leveraged forex transactions were defined for the first time in the Capital

Market Law. Accordingly, this market is regulated by Capital Markets Board starting from end-August.

In July 2011, asset management companies were given the opportunity to apply for brokerage licenses,

limited to mutual fund transactions.

As the global turmoil affected the markets, buy-backs have been introduced for the first time in August

2011. Concurrently, the regulation regarding short-selling was tightened.

In October 2011, CMB released a new communiqué related with corporate governance. Accordingly, each

listed company in the ISE-30 Index is required to have independent board members. The number of the

independent board members has to be at least one-third of the total board. Banks are exempt from this

regulation.

In addition, a draft for a new Capital Market Law has been submitted to the Parliament in June 2012.

Market Reforms

The Emerging Companies Market (ECM), established as a separate market on the ISE, became

operational in October 2010. This market with looser requirements than the main market is designed for

SMEs. A market advisor mechanism is introduced for the ECM.

On the bonds and bills market of the ISE, several new sub-markets were established lately. In May 2010,

ISE introduced a new borrowing market for companies whose stocks are traded on ISE. Those companies

will be able to issue debt instruments on the Offerings Market for Qualified Investors without issuing a

prospectus and a circular. Repo Market for Specified Securities and Interbank Repo-Reverse Repo Market

were established in December 2010 and January 2011.

Istanbul Regional Financial Centre Project

The government has undertaken a project in order to make Istanbul a regional financial center. Studies

have started under the coordination of the government and working groups have been formed in early

2009, with the contribution of 81 public and private institutions, non-governmental organisations

(including TSPAKB) and universities. The resulting Strategy Document was made public in October 2009.

The studies are continuing in a wide range of areas including the justice system, regulatory and

supervisory framework, diversification of financial services, taxation policies, human resources and

infrastructure via working committees. Our Association is involved in every step of the project.

IPO Campaign

The Istanbul Stock Exchange, the Capital Markets Board, the Union of Chambers and Commodity

Exchanges of Turkey, and the Association of Capital Market Intermediary Institutions of Turkey signed a

protocol to encourage public offerings in 2008. Within the context of the protocol, a series of seminars,

conferences and private meetings are organised across the country in order to increase the awareness

among the companies about public offerings, inform them about the benefits and procedures of an IPO.

A similar protocol was signed in February 2011 by the Istanbul Stock Exchange, the Capital Markets

Board, the Small and Medium Industry Development Organization, and the Association of Capital Market

Intermediary Institutions of Turkey in view of encouraging the IPO of small and medium size enterprises.

Within the context of the protocol, the Small and Medium Industry Development Organization will

subsidise the IPO costs of SMEs to be traded on the newly established Emerging Companies Market.

Investor Education

As stated in Section III under the “Investor Education Activities”, in order to increase the awareness

about the capital markets, investor education activities were initiated jointly with capital markets

institutions.

18 UAE (DIFC) DFSA The UAE and Dubai have not been immune to the fallout of the global financial crisis. As a result trading

volumes have decreased dramatically.

To further support the capital markets in the DIFC, the DFSA has completed a review of the offering and

securities rules to recognise regulatory developments in peer jurisdictions and enhance the regulatory

framework applicable to the issue of securities and the continuing obligations of Reporting Entities (listed

companies). Effective from October 1, 2011 the DFSA operates the Official List for Securities and is the

single responsible authority for admitting companies to the list and monitoring continuing obligations and

disclosures.

The DFSA has also amended its Recognition regime which now includes Alternative Trading Systems and

enables such platforms to remotely connect firms authorised in the DIFC.

19 Vietnam VBMA - The Government issued Circular 21 which is effective on September 01, 2012 to govern the interbank

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lending.

- The State Bank of Vietnam (SBV) is trying to regulate the gold market to restrict the short-selling of gold

by commercial banks in Vietnam.

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V – 2. Specific Challenges in Equity Markets

No. Country Name of

Organization

Specific Challenges in Equity Markets

1. Cambodia SECC - Short-time investor

- Promoting more listed companies to raise fund through securities market

- Financial literacy and securities awareness of the public

2 China SAC 1. It is necessary to improve multi-level capital market. At present, China has not yet formed a national

OTC market under unified supervision.

2. To strengthen investor education, improve investor suitability system. At present, the management on

the investor suitability is still weak. It should take measures to strengthen risk revealing and

classification of various products in multi-level market, carry out investor appropriate system matching

with different product. Ensure the right product sold to the right investors.

3. Product structure of capital markets is far from perfect. Capital markets need to expand the breadth

and depth in serving the national economy.

4. The intrinsic restraint mechanism is not perfect,some market participant lack of honesty and

law-abiding sense.

5. To continuously push on the works on securities companies‟ creation and development.

3 India ANMI Reviving the overall market sentiment

Enhancing investors confidence in the Capital Market

Enhancement of participation by Retail Investors

Investor education process in non-metro area including developed rural areas

Enhancing levels of governance in the Capital Market

Enhancing the overall image of the market intermediaries

Finding pragmatic solutions to current issues facing the capital/stock market.

4 Indonesia APEI The specific challenges in Indonesia Equity Market are:

Globally economic recession, the crisis in europe along with recovery efforts in the US is

very likely to continue to affect the global situation

Continues efforts to increase participation from market players, particularly domestic

ones, in term of go public companies, availibility of attractive investment products as well

as the increasing number of of investors in the Capital Market

The equality of comprehension of knowledge about investing in equity securities

Introducing the capital market activities to attract much more investors

Promotes infrastructure development of Indonesia Capital Markets to meet the needs of

Capital market Community

Overseethe market participants to be comply with the provisions of regulations

5 Japan JSDA 1. Japan‟s stock exchanges having been facing fierce competition from electronic trading systems of

foreign exchanges and proprietary trading systems (PTSs).

2. Insider stock trading has been successively exposed recently, involving major securities houses in

Japan. Most of these cases show that their officials leaked information about large new equity issues

to fund manager and other clients.

6 Kazakhstan FSC Kazakhstan's stock market, including emerging companies, remains sluggish. Joint stock companies don't

release shares in a free trade.

7 Laos SECO The number of stock listed in the exchange is still very limited and the legislation is not sufficient and not

yet complies with the related existing laws.

8 Malaysia ASCM Malaysian equity market continues to be inflicted by issues of truncated participation from foreign funds

and retail investors. In terms of market demographics, foreign investors remained moreor less constant at

22% by value of shareholding and trading participation stood at 26% in 2011. Participation from retail

investors dwindled to 26% of total trading value in 2011 as compared to 27% in the previous year.

9 Mongolia MASD To increase listing requirements of Mongolian Stock Exchange and clear listed companies or cancel some

companies from listing.

To provide disclosure of information of listed companies.

To register and list shares of Infrastructure and mining companies with strategic projects of Mongolia.

10 Myanmar CBM The Securities Market is not established in Myanmar.

11 Pakistan SECP The equity segment has seen substantial growth in the past. Among other reforms, the market witnessed

the introduction of derivative products, separate automated systems for trading of equity instruments,

various leverage mechanisms, book-building mechanism for initial public offerings, market making etc.

However, continuous efforts need to be made to expand and broaden the product portfolio in line with

international trends to enhance investment opportunities. While the cash market in Pakistan is relatively

mature, the derivatives segment has not performed to its fullest. The range of derivative products offered

at the stock exchanges is relatively limited. Diversified derivative instruments need to be launched to

enable investors to better manage their portfolios and risks.

12 Philippines CMIC There is a purported lack of liquidity in the market, which is founded on certain grounds, such as the

singular nature of the Philippine market‟s product offering, which basically consists of cash equities.

Furthermore, a substantial fraction of the Philippine capital markets is deemed untapped, both on the

investor side and issuer side.

13 Romania RSBA The main challenge in the Romanian equity market remains the permanent struggle to change its status

from frontier market to emerging market. One of the most important issues is represented by the reduced

number of listed companies, and therefore the lack of foreign investors to trade in Romania.

14 Sri Lanka SEC Increasing the trading frequency of listed equity

Attracting regular research coverage of Sri Lankan stocks by international brokerage houses and fund

60

managers

Expanding the institutional investor base

Enabling the growth of the domestic mutual fund/investment trust industry

Minimising transaction costs and expanding the use of internet trading

Simplifying IPO application

Attracting large, high quality issuers such as state banks to expand the issuer base

Increasing the free float of listed stocks

15 Thailand1 ThaiBMA n/a

16 Thailand2 ASCO - Uncertainty of government policy on demutualization of SET

- Because of AEC, the introduction of new equity instruments is needed in order to attract investors.

- Number of investors is a bit low compare to total number of outstanding accounts, that is,

approximately 25%.

17 Turkey TSPAKB To increase the number of listed companies, an IPO campaign protocol was signed in 2008 with related

parties. The aim is to increase the awareness of IPO activities among the companies, and encourage

non-listed companies to be listed to ISE. A similar protocol was also signed for SME companies and export

companies in 2011. On the other hand, some improvements in regulations were also made by the CMB, as

stated in “Section V”.

As a result, there has been an increase in the number of listed companies. 10 SMEs, one foreign and 67

local companies were offered to public between January 2010 and July 2012. The total number of listed

companies is 404 at the end of the July 2012 including collective products and alternative markets. But it

is still too low compared to comparable markets‟ stock exchanges

18 UAE (DIFC) DFSA Due to market conditions equity markets in the UAE have seen very limited IPO activity. No IPO activity

took place in the DIFC during 2011 although some preliminary discussions have been taking place over

the last few months.

19 Vietnam VBMA n/a

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V – 3. Specific Challenges in Bond Markets

No. Country Name of

Organization

Specific Challenges in Bond Markets

1 Cambodia SECC The SECC and the Ministry of Economic and Finance are in the process of drafting the rules and

regulation of the government bond and corporate bond.

2 China SAC Set up a normative and uniform bond market.

The bond market needs to improve its creation, e.g. developing high-earned bond for making up for the

system blank of bond market and satisfying diversified financing demands.

3 India ANMI The Bond Market as compared to the Equity market is smaller in portion with identified participants like

Government, Corporate, Financial Institutions, Mutual Funds etc. The following will provide the overall

current scenario.

4 Indonesia APEI Increasing the liquidity and improving a pricing standard benchmark available for all

participants.

Enhancement of the bond transactionby reporting (Trough CTP system), although KPEI has a

clearing system for bond trading transaction, many of the participants trade over the counter directly

among the securities houses and banks.

Enhance the role of therelated authorities in their efforts to create a more reliable price reference

Overseethe market participants to be comply with the provisions of regulations

5 Japan JSDA 1. Vitalization of Japanese corporate bond markets:

Japan‟s corporate bond market is still small compared with the markets in the United States and

Europe. Moreover, the issuance of corporate bonds in Japan is still limited to fairly high-rated

companies in specific sectors. It is difficult for companies with lower credit ratings to issue corporate

bonds. Moreover, the liquidity of the secondary market is low, and compared with measures taken in

overseas markets to improve investor confidence in recent years, the price information structure in

Japan have not really been adequate. In addition to this background, corporate bond issuance suffered

dramatic declines after the occurrence of the major earthquake disaster.

2. Realization of T+2 for JGB settlement

In order to reduce the settlement risk of the JGB transaction, the reduction of settlement period for

the JGB transactions has been discussed, and the settlement period for the JGB outright transactions

has shortened from T+3 to T+2 (the delivery and the settlement occur, in principle, on the 3rd business

day starting from the contract date) since April 23, 2012. After this, the deliberation on the T+1

settlement for the outright transactions is expected to start from the autumn 2012.

6 Kazakhstan FSC Major Challenges in a bond market are low liquidity and small number of issuers.

7 Laos SECO The Lao domestic bond market is still in its early stage. There are only two types of bonds available in

Laos include treasury bills (T-bills) issued by Ministry of Finance and BOL bonds issued by Bank of the

Lao PDR. No business company, such as a public limited company, besides a bank has so farissued and

sold corporate bonds at least through public offering.

8 Malaysia ASCM There is a need to broaden the capability and capacity of the bond market to supply financing to a wider

base of industries and projects; particularly in supporting the structural shift towards the services and

knowledge-based industries. The ability to widen access to bond financing for more sophisticated ventures

is critically dependent on broadening the investor base and appetite for a wider array of debt products and

credit risks. Widening the credit spectrum requires strengthening investor confidence, increasing the

participation of the public and private investment management industry, expanding the product range

and enhancing the market infrastructure.

9 Mongolia MASD To issue long-term government bonds. Mongolian government firstly issued its bonds with 1-5 years in

June, 2011. It has issued very short-term bonds with 1-6 months in the MSE.

To issue mortgage.

10 Myanmar CBM State-owned Banks and Private Banks are major Investors for Government Treasury Bonds in Myanmar.

Therefore, over 99% of the outstanding bonds are subscribed by the institutional investors to be treated in

Liquidity positions and reserve requirement.

Individual investors pay less interest in investing of government bonds due to lower coupon rates

compared to the bank deposit rates.

11 Pakistan SECP Pakistan‟s debt market remains significantly underdeveloped. While equity markets typically tend to

develop earlier than debt markets in most developing countries, Pakistan‟s economy and financial sector is

at a stage where it can support and benefit from a vibrant and efficient debt market. One of the main

issues in the development of the bond market remains integration of the National Savings Scheme

instruments into the mainstream capital markets as the subsidized nature of its saving products makes

comparable market instruments unattractive and non-competitive. Also, potential investors need to be

incentivized through tax rebates and existing product range needs to be diversified by introduction of

government securities.

12 Philippines CMIC 1. Increase of liquidity through the broadening and the diversification of investor base;

2. Invitation of foreign investors into government bond markets to enhance market sophistication;

3. Enforcement of the regulatory framework (i.e., disclosure obligation);

4. Simplification of significant processes;

5. Broadening of the database;

6. Reduction of cost in offering of securities;

7. Convergence with International Financial Reporting Standards (IFRS) by 2012; and

8. Development of derivative and swap markets by establishing an exchange-based OTC

derivative trading; Philippines closed the Manila Futures Exchange in 1997.

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13 Romania RSBA The bond market in Romania consists mainly in municipal bonds (39) and government bonds (28). The

main challenge is increasing the confidence of the corporate sector to seek financing through the capital

market.

14 Sri Lanka SEC Establishing a data reporting and information dissemination mechanism for unlisted corporate bonds

that is publicly available to enhance transparency in bond markets and encourage greater

participation

Building the capacity and technical skills of financial market intermediaries and the public on debt

products/trading

Creating a market-making mechanism for corporate bonds

Increasing the trading frequency of corporate bonds

Expanding the investor base

Attracting large, high quality issuers to expand the issuer base

15 Thailand1 ThaiBMA 1. Expanding market players to securities companies since banks dominate bond market and securities

companies do not have large amount of funding for bond trading.

2. Most mutual funds for investors, especially individual investors, only invest in short-term bond to

avoid interest rate risk. Many individual investors lack understanding and perceive bond investment

as bank deposit.

3. Lack of tax incentive for individual investors in bond market as they have to pay for capital gain tax

while it is exemption in stock market

4. Not enough supply of long duration bonds for insurance companies.

5. Lack of liquid bond hedging instruments. Bond futures and interest rate futures listed on the Thailand

Futures Exchange are rarely traded.

6. Not easy to short sell bonds.

7. No market for speculative grade / high yield corporate bond.

16 Thailand2 ASCO n/a

17 Turkey TSPAKB In terms of bond trading, ISE is ranked 8th among the members of World Federation of Exchanges as of

end 2012/06. But corporate bond activities are still quite limited, despite the recent revival thanks to low

real interest rates and changes in regulations.

18 UAE (DIFC) DFSA The DIFC is home to a large bond and Sukuk (Islamic bonds) market admitted to the Official List

maintained by the DFSA. The DIFC provides an environment that gives credibility and high visibility to

issuers of Debt products on its platform. Products currently admitted include Euro Medium Term Notes

(EMTN) issued by prominent UAE banks and a Medium Term Note (MTN) issued by a prominent

corporate entity of the Dubai Government.

This year the DFSA has approved the admission of U.S. $650,000,000 Trust Certificates of JAFZ Sukuk

(2019) Limited and U.S.$500,000,000 Trust Certificate under the U.S.$2,000,000,000 Emaar Sukuk

Limited Trust Certificate Issuance Programme. The securities, which are based on Islamic principles of

Wakala and Ijara respectively, were allowed to be admitted to the Official List of Securities of the DFSA in

June 2012 and July 2012 year. The securities are also admitted to NASDAQ Dubai for trading on its

market and are not due for redemption until 2019.

19 Vietnam VBMA Uncertain macro outlook unfavourable for bond market

CPI is contained to around 7-8% this year 2012 but the inflationary expectation is building up.

The government is trying to restructure the SOEs, banking, and financial sectors but all efforts

now seem to be negatively affected by the uncertain political environment

Gold prices are both increasing internally and externally but the gap between the domestic price

and international price remains high, about VND2.5 million on average

Upward pressure on USD/VND remains intact

Liquidity remains thin

“Buy and hold” practice

No real benchmark curve that reflects the real market levels

Investor base weak

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V –4. Specific Measures introduced / Implemented for the Securities Market

No. Country Name of

Organization

Specific Measures introduced / Implemented for the Securities Market

1 Cambodia SECC 1. Vision and Financial Development Plan 2001-2010.

2. Financial Sector Development Strategy (FSDS) 2006-2015 (Updated from Vision and Financial

Development Plan for 2001-2010 in 2007)

3. Financial Sector Development Strategy (FSDS) 2011-2020 (Updated fromFSDS 2006-2015 in

2011)

2 China SAC Specific Measures introduced by CSRC:

1. Establish inside information insiders registration management system for listed companies.

2. Maintain a continuous high pressure on insider trading behavior, while at the same time devote more

efforts to increasing criminal crackdown. Finally, raise the delinquent costs of insider trading.

3. Inspect and rectify all types of transaction market for guarding against financial risk

4. Take measures to make Margin Purchase and Short Sale Business of Securities Companies transferred

from pilot to a formal routine.

5. Carry out Refinancing Margin Purchase and Short Sale business. Allow securities finance company

lending fund and securities owned by self or raised legally to security companies. Security companies

can use the fund and securities to do business of Margin Purchase and Short Sale.

6. Carry out the system of RMB Qualified Foreign Institutional Investors (RQFII), allow the subsidiaries

in Hong Kong of domestic fund management companies, security companies to use RMB raised in Hong

Kong to invest in domestic security market.

7. Take measures to encourage all kinds of long-term fund investing in stock market. Coordinate the

development of various institutional investors, such as Security Investment fund, Pension Fund, Social

Security Fund, Insurance Companies, etc. Actively guide the venture capital and private equity fund

into public and standardized operation.

8. Enhance the analytical ability on macroeconomic for securities company. Make securities company

playing an active role in the construction of market.

Self-Regulatory management measures by SAC:

1. SAC set up 15 special committees, including Direct Investment Committee, Advisory Committee,

Securities Brokerage Committee, Investment Banking Committee, Asset Management Committee,

Securities Analysts and Investment Advisers Committee, Securities Companies Compliance Committee,

Finance, Accounting and Risk Control Committee, Innovation and Development Strategy Committee,

International Cooperation Committee, Securities Credit Rating Committee, Human Resources

Management Committee, Information Technology Committee, Securities Dispute Mediation Committee,

Self-regulation Oversight Committee, Self-regulation Coordination Committee

As the branch institutions of SAC, The special committees are aimed at ensuring and carrying out the

rights of SAC members, improving members‟ active participation on SAC works. The committee

members cover more than 150 member units.

The special committees fully reflect the opinions of SAC members on the issues of sales network policy,

issuance system reform, capital management development, the construction of information separation

wall systems of the securities companies, revenue policies of capital market. Moreover, it will improve

innovation development risk indicator system of securities companies.

2. Impelling business innovation

SAC has been actively organizing and putting forward the business creation on relatively professional

fields. For the important issues involved in special committees, SAC designed programs and supervised

its implement.

On May 7 and 8, 2012, SAC hosted the Conference on Innovation and Development of Securities

Companies, where SAC raised political suggestions to the difficult and urgently-needed to be resolved

issues.

3. Strengthen formulation and revision on industry standards.

SAC researched and formulated self-regulatory measures on Direct Investment Business & Sponsor,

Guideline of Regions that Securities Company Business Department is Saturated, and Guideline of

Information Wall System for Securities Company. SAC released Practicing Rules for Security Research

Report, Guideline for Evaluating the Effectiveness of Compliance Management of Securities Company,

Guideline for Estimating The Value of Collective Financial Product, etc.

4. Carrying out consultative assessment on relevant laws, regulations and policies of security market.

SAC had completed the implementation effect of “Securities Law”.

3 India ANMI Periodic Changes/modifications aimed towards development and investors protection

Simplifications in procedural areas like: Collections of Investors details called as “KYC”process which

is “Know your customer”

Modifications to the process of raising funds from the Capital market like Initial Public Issue (IPO);

follow – up IPO; other modes of raising Funds

Emphasis on enhancing “governance” in the Capital/Stock Market

Focus on investors education

Focus on Investors protection

Focus of speedy grievance redressal process for investors

4 Indonesia APEI Growing the market capitalization through addition of more and more publicly listed companies

Increasing transparency through the implementation of separate share and cash accounts for all

investors which accessible through internet (AkSES Card)

Introduction of new and stricker of Capital Market accounting standard and a more tighter

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method of calculating Net Adjusted Working Capital (MKBD) to ensure the healthiness of all

securities houses

Oversightthe improvement of the securities company internal control, system and professionalism

of its employees

5 Japan JSDA 1. Merger of Stock Exchanges

In November 2011, the Tokyo Stock Exchange (TSE) and the Osaka Securities Exchange (OSE)

announced a merger of their operations with a target date in January 2013. The merger of the TSE

with its large share of the stock market and the OSE with its strengths in the Nikkei 225 futures and

the derivatives markets would give birth to an exchange group with a good balance of strengths in

both cash and derivatives transaction markets.

2. Partial revision of the Financial Instruments and Exchange Act

In September 2012, the Japanese Diet passed a bill for amendment of the Financial Instruments and

Exchange Act to enhance the international competitiveness of Japan‟s markets as well as the

convenience of those markets for users. The amendment is also intended to improve the financial

system in the light of the turmoil in global financial and capital markets and to develop appropriate

regulations assuring users of secure transactions. The following are the major amendments being

introduced.

• Legal and regulatory frameworks to facilitate the establishment of a comprehensive exchange

Currently, the operators and regulators of securities and financial products and commodity products

are separated. To facilitate the establishment of a comprehensive exchange that trades all of these

products, the amended act has prepared the way for new systems, including 1) enabling Financial

Instruments Exchanges to trade commodity derivatives, 2) integrating the regulatory and oversight

functions for a comprehensive exchange under the Prime Minister (Financial Services Agency acts on

behalf of), and 3) developing a framework enabling intermediaries and central counterparty (CCP)-

to comprehensively handle securities and financial products and commodity products.

• Improving the fairness and transparency of OTC derivatives and related transactions

In accordance with the international consensus for OTC derivative market reforms, the amended act

1) requires the obligatory use of electronic trading platforms for certain OTC derivatives

transactions, 2) requires public announcement by the operators of electronic trading platforms of

trading and other information, such as price and quantity, and 3) develops an approval framework to

enable foreign electronic trading platform operators to offer their services in Japan (Systems for

mandatory use of CCPs for clearing and for data storage and reporting of trading information have

already been established through the 2010 amendment to the FIEA.).

• Ensuring appropriate regulations to prevent market misconduct

To enhance deterrents to market misconduct, the amendment expanded the scope of the

administrative monetary penalty and the authority for necessary investigations. On the other hand,

to facilitate the smooth management of company groups, the amendment exempted certain

transactions related to reorganization of companies from the scope of insider trading regulations.

3. Implementing Measures to Prevent Insider Trading and Responding to Unfair Trading Practices with

Public Offering Capital Increases;

In collaboration with stock exchanges, JSDA promoted the registration of listed companies on the

Japan-Insider Registration and Identification Support System (J-IRISS). To persuade listed companies

to register, the JSDA sent registration request letters to listed companies not yet registered on J-IRISS

and visited individual companies. As a result, the number of J-IRISS registered companies at March

31, 2012 increased to 2,193 companies, or 61.48% of all listed companies. This figure compares with

1,827 companies, or 50.55% of all listed companies at June 30, 2011. The JSDA will continue to

implement measures to promote registration on J-IRISS to achieve registration by all listed

companies.

In August 2011, the JSDA notified member firms about establishing a thorough management system

for corporate-related information before making a capital increase through a public offering. In

addition, in November 2011, the JSDA took measures to comply with partial revisions of the FIEA

Enforcement Order, requesting issuers of prospectuses to include content on short sale regulations. In

a related action, it also partially revised JSDA‟s Regulations Concerning Underwriting, etc. of

Securities. The revised section encourages issuers to try and explain the content on short sale

regulation to customers receiving the prospectus. The partial revisions were enforced in December

2011.

4. Preventions of fraud using unlisted stocks, corporate bonds, and other securities;

As a measure to prevent investors from becoming victims of investment scams using unlisted stocks,

corporate bonds, and other securities, the JSDA carried out activities to enlightened and warn

investors about such investment scams. The JSDA included this topic in its events held on Investment

Day and its various lectures and seminars for consumers and its training courses for consumer affairs

consultants. Through its call center dedicated to unlisted stock investment scam complaints, the

JSDA also provided information related to unlisted stocks, corporate bonds, and other securities

investment scams and on cases of such investment scams reported to the authorities.

In February 2012, the JSDA established an Initiatives Plan to Prevent Unlisted Stock and Other

Investment Scams and proceeded with measures to prevent scams. Through its Study Group on

Advertising Methods for Developing and Promoting Markets, etc., the JSDA also considered effective

public relations (PR) and promotional activities to prevent unlisted stock scams.

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5. Measures to Vitalize the Corporate Bond Market

The JSDA set up a Study Group to Vitalize the Corporate Bond Market in July 2009. The study group

used sub-committees to focus its deliberations on the four key issues of 1) a review of underwriting

examination by securities companies, 2) granting of covenants and information disclosure, 3) corporate

bond management, and 4) development of infrastructure for disseminating corporate bond price

information. The study group made public its report “Work Toward Vitalization of the Corporate Bond

Market” on July 30, 2012. The Study Group is continuing its deliberations, focusing now on measures

to realize a more efficient, transparent, and highly liquid corporate bond market.

6. Revision of Financial and Securities-Related Taxation System

Guided by the slogan, “From Savings to Investment,” Japan introduced a preferential tax rate of 10%

on dividends and capital gains from publicly listed stock and some other securities in 2003. Under the

difficult economic and financial conditions in ensuing years, this preferential tax treatment has been

extended, but is scheduled to end in 2013, resulting in the tax rising to 20% in the following year.

Despite this situation, basically Japan‟s government is proceeding with establishing a securities

taxation system that will promote securities investment. Specifically, plans call for the 2014

introduction of a tax exemption measure (Japan version ISA) for small amounts of dividends and

capital gains from listed stocks and some other securities up to a maximum of ¥3 million over three

years. In addition, the government plans to consider expanding the scope of the allowable netting of

income and losses on public and corporate bonds, etc., in the tax revisions for fiscal 2013.

Furthermore, the JSDA is requesting the Japanese government to provide a tax treatment measure

that supports the formation of education savings for children. The measure would make income on

funds invested in an account that can only be used for paying higher education expenses tax free.

6 Kazakhstan FSC The Committee's activities concerning the regulation of the securities market inrecent years were directed

at the following:

developing of the securities market infrastructure;

strengthening the mechanisms of the protection of interests of consumers of financial services;

taking action which will contribute to strengthening the financial state of organizations having the

licenses to conduct professional types of activities in the securities market;

strengthening the mechanisms of supervising and control of the activity of organizations having the

licenses to conduct professional types of activities in the securities market;

strengthening requirements of submission the information from securities market organizations,

increasing the transparency of the information

strengthening the mechanism of prevention the possibility of fraud including manipulating the securities

market;

strengthening requirements to the prospectus of bond emission.

7 Laos SECO 1. Capital Market Development Strategy:

SECO as a regulator will facilitate the development of the capital market as a crucial source of long-term

capital raising to support economic expansion as well as developing framework of regulations, laws,

taxes, accounting and IT in order to increase efficiency of the capital market. Foster clear, complete, and

accurate information disclosure is also one of the strategies. Moreover, the other important strategies in

developing our capital market is to promote linkage and standards of Lao capital market to comply with

international requirements, to create conditions to improve the enterprise to strengthens, transparent

financial and quality goods and services, and to create conditions of purchase - sale of securities, and

the tack to take those skills can provide high flexibility and force to present to investors invest in the

stock market is collaboration.

2. Action Plan for Capital Market Development Strategy:

To upgrade existing Decree on Securities and Securities Market into Law on Securities by end of

2012;

To complete drafting National Strategy on Securities Market Development for 2011-2020 by 2013;

To introduce new regulations such as:

- Regulation on home trading system,

- Regulation on net capital ratio of securities firms,

- Regulation on corporate bond,

- Others

8 Malaysia ASCM 1) Capital Market Task Force

5 working groups established to assist the Capital Market Task Force (CMTF) to make

recommendations to improve the efficiency and competitiveness of Malaysia‟s capital market.

Representatives from Regulatory Agencies, market players, commercial banks, financial institutions,

remisiers association, fund managers, analysts, government linked investment companies and legal

firms.

2) Tiered Licensing

i) Full fledged dealers representatives

ii) Marketing officers

iii) Trade executioners

3) Retail Bonds

The Securities Commission (SC) launched the retail bonds and sukuk framework in september 2012

66

which allows retail investors to invest directly in bonds and sukuk.

It said the launch is also in line with the initiative set out under the Capital Market Master Plan 2 to

facilitate greater retail participation in the bond and sukuk market.

The framework enables retail bonds and sukuk to be issued and traded either on the exchange (Bursa

Malaysia) or over-the-counter (OTC) via appointed banks.

By 2013, this access will be expanded to include issuances by public-listed companies and banks.

Relevant guidelines and regulations are expected to be issued in January 2013.

4) ASEAN Exchange Link

ASEAN Exchanges is a collaboration of seven exchanges from Indonesia, Malaysia, the Philippines,

Singapore, Thailand and Vietnam. The collaboration aims to promote the growth of the ASEAN capital

market by driving cross-border collaboration, streamlining access to ASEAN, creating ASEAN centric

products and implementing targeted promotional initiatives.

The ASEAN Trading Link marks the first key milestone for ASEAN Exchanges towards breaking down

the barriers to cross-border trade in ASEAN. The ASEAN Trading Link is an excellent conduit to tap

the region‟s growth opportunities as it allows investors an easy access to a wider investment selection

across the connected markets.

Malaysia and Singapore are the first two connected markets in ASEAN on 18 September 2012, while

Thailand will be next when The Stock Exchange of Thailand connects on the ASEAN Trading Link in

October 2012.

The three markets, Malaysia, Singapore and Thailand, serve as the foundation of the ASEAN Trading

Link providing a single entry-point access to three of the largest stock markets of the ASEAN

Exchanges collaboration. Jointly these three markets offer nearly 3,000 listed companies with a

market capitalisation of USD1.4 trillion. Together they account for some 70% of the total market

capitalisation of ASEAN.

5) Referral Agents:

Securities and futures brokers are now able to refer their respective clients to one another following

amendments made to the Securities Commission‟s Licensing Handbook allowing for Referral Agent

activities.

The amendments, initiated by Bursa Malaysia, will create a more facilitative trading environment and

boost the number of participants in both the securities and derivatives market and allow a

Participating Organisation (PO), as a holder of the Capital Markets Services License (CMSL), to refer

clients to a Trading Participant (TP) of Bursa Malaysia Derivatives, and vice versa.

Furthermore, Dealer‟s Representatives (DR) who hold the Capital Markets Services Representative‟s

License (CMSRL) for dealing in securities may now refer their clients to a TP via their POs, and likewise,

Registered Representatives (RR) holding the CMSRL for dealing in derivatives may refer their clients to a

PO via their TPs. Referral agents must only undertake the regulated activities they are licensed for and

not any other regulated activities.

9 Mongolia MASD The Parliament adopted a new company law on Oct 06, 2011.

We are discussing a draft of new Securities Market Law by Mongolian government.

We are developing new trading, clearing, settlement, brokerage and dealing systems with LSE

management team.

Mongolian association of securities dealers organizes a training to get professional license in

starting of March 2011.

To enter legal requirements and authorized rights for a Self-regulatory organization into a draft of

new law. We are preparing to become a self-regulatory organization

10 Myanmar CBM Not yet

11 Pakistan SECP Performance Functions of Self-Regulatory Organizations in Pakistan:

All SROs (the stock and commodity exchanges, the Central Depository (CDC) and the National Clearing

Company (NCCPL)) have the authority to make, amend or rescind their regulations with prior approval of

the SECP. In accordance with the same, the SROs have various regulations in place that outline the rules

and procedures for conducting trading activities and/ or business at these SROs. All individuals and firms

engaged in the trading of securities and/ or commodities are bound by the respective regulations of the

SRO they are related to.

For the enforceability of such regulations, each SRO is equipped with the relevant automated electronic

system that assists in ensuring compliance of the regulations pertaining to the trading activities of market

participants by enabling the SROs to continually monitor the markets. Further, enforceability is ensured

through the provisions for penalty developed by each SRO to penalize market participants for any

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violation of such regulations. Such penalties have been specified in the relevant regulations of all SROs.

The establishment of disciplinary proceedings to cater for any violations of the existing rules and

regulations is vital to ensure compliance of the regulatory frameworks of the SROs. In order to deal with

various contraventions of the regulations of the stock exchanges, Section 4 of their General Regulations

specifies the procedures for conducting disciplinary proceedings against members of the stock exchanges

who have violated any of the respective regulations. Apart from the procedures for conducting disciplinary

proceedings, specific penalties have also been prescribed for the same, wherein upon failure of a member

to pay the specified fine to the exchange, the Board of Directors of the exchange may suspend or expel such

member. Under Section 5 of the said Regulations, the Board may suspend or expel any member of the

exchange who is found guilty of fraudulent conduct.

The commodity exchange has prescribed its disciplinary procedures for various violations under Sections

3.38-3.44 of the General Regulations which also includes the relevant penalties that may be imposed by

the Exchange on a case to case basis. Disciplinary proceedings may also be initiated by CDC against its

CDS Elements and by NCCPL against its NCC Participants under Section 14 of the CDC Regulations and

Section 14 of the NCCPL Regulations respectively. Penalty provisions for the same have also been

specified the relevant regulations of CDC and NCCPL.

Further, the companies desirous of being listed at the stock exchanges have to fulfill the requisite

conditions outlined in the Listing Regulations of the stock exchanges and after listing need to comply with

the regulations established by such exchanges. Furthermore, all members/ brokers of the exchanges and

the companies listed at these exchanges, in case of stock exchanges, have to abide by the regulations of

their respective exchanges at all times.

Major reforms undertaken in the recent years are as follows:

The stock exchanges in Pakistan were recently converted into demutualized entities. The Stock

Exchanges (Corporatisation, Demutualization and Integration) Act, 2012 was promulgated on May 7,

2012. The Act provides a framework for the corporatization, demutualization and integration of the stock

exchanges in a time bound manner. This was a much awaited development in the capital market and has

now brought the Pakistani exchanges on par with various other international counterparts.

Demutualization is expected to lessen the conflicts visible in a mutualised set-up where the brokers

enjoyed rights of ownership, decision-making and trading. It will support enhanced governance and

transparency at the stock exchanges and bring greater balance between interests of various stakeholders

by clear segregation of commercial and regulatory functions and separation of trading rights and

ownership rights. Post-demutualization, the Pakistani stock exchanges will be in a better position to

attract international strategic partners and good quality issuers.

To provide transparent and efficient price discovery through an automated trading platform for debt

market securities at the stock exchanges, a Bonds Automated Trading System was introduced. Also, to

introduce a separatecounter for listing and trading of privately placed debt securities, a regulatory

framework was devised whereby companies are allowed to listtheir debt securities issued through private

placementson the stock exchanges under their Regulations governing Over-the-Counter Market.

To provide the investors with a platform for investing in the commodities market and to fulfill the

hedging requirements of various market segments related to the commodities market, Pakistan‟s first

commodity exchange- PMEX was established which commenced operations in 2007. PMEX provides a

regulated platform for trading of futures contract in commodities and currencies. Since then the product

portfolio of PMEX has been broadened continuously to cater for the hedging and speculative needs of

various stakeholders/investor groups.

To provide investors with basic hedging instruments, financing options and increased investment

alternatives, deliverable futures contracts and cash-settled futures contracts are available for trading at

the three stock exchanges. Additionally Stock Index Futures Contract based on the KSE 30 Index and

Sectoral Indices for oil and gas sector and banking sector are available at the Karachi Stock Exchange

(KSE).

To add depth and diverse investment alternatives to the market, Exchange Traded Funds and index

based Options have been introduced in line with international best practices.

To cater to the increasing liquidity and financing needs of the Pakistani capital market, the Securities

(Leveraged Markets and Pledging) Rules, 2011, covering the products of Margin Financing, Margin

Trading and Securities Lending and Borrowing, were formulated and promulgated.

In line with the Government‟s objective of documenting all incomes and sectors of the economy, to

address practical issues and to encourage activity in the securities market, the SECP had proposed

revamping of Capital Gains Tax (CGT). Accordingly, Finance (Amendment) Ordinance, 2012 has been

promulgated on April 24, 2012 and the Income Tax Rules are also in promulgation stage. Under the

revised CGT regime, the National Clearing Company shall act as a withholding agent to deduct and

deposit CGT from investors‟ transactions while providing an automated and efficient mechanism for the

calculation, deduction and deposit of tax.

68

To improve standards of listings at the stock exchanges and to enhance transparency and investor

protection in the capital market operations, a comprehensive policy was formulated for dealing with

companies in continuous default of securities market laws. The said policy forms part of the Listing

Regulations of the stock exchanges and is greatly assists in dealing with such listed defunct/non-compliant

companies.

A new mechanism for issuing/offering shares to High-Net Worth clients and Institutional Investors

known as Book Building was launched.

To ensure transparency and improve efficiency in the capital market operations, „Automation of

Securities Settlement‟ project at the CDC was launched in collaboration with the Central Depository,

National Clearing Company and the stock exchanges, whereby securities will be automatically transferred

from the respective sellers‟ account to the respective buyers‟ account instead of being routed through the

member‟s main account.

With the objective of fostering good governance principles and practices in the corporate sector, a new

Code of Corporate Governance applicable on the listed companies was introduced incorporating

international best practices.

To implementrobust Anti-Money Laundering/Combating the Financing of Terrorism regime in the

Pakistani capital market in light of the FATF recommendations and international best practices, effective

Know-Your-Customer and Customer-Due-Diligence policies and procedures were introduced for the capital

market and its intermediaries.

To ensure improved monitoring of internet trading activities offered by the brokers, Internet Trading

Regulations were approved for the stock exchanges which comprehensively cover various aspects while

effectively addressing issues unique to this segment including risk management and privacy of investors'

accounts.

To strengthen monitoring and compliance by market intermediaries with the applicable regulatory

provisions and to improve enforcement power of the regulators, Regulations governing System Audit

(Regulatory Compliance) of the Brokers of the stock exchanges were revamped with major changes in the

brokers‟ audit process and scope.

Following measures are in the pipeline and are expected to be completed soon:

Laws/statutes such as the SECP Act, Futures Trading act and Securities Act have been drafted by the

SECP and are in different stages of approval/promulgation. These Laws are essential for improving the

regulatory framework in light of both local and international developments in the capital markets and

enhancing SECP‟s role as the apex regulator to ensure better regulation and supervision of the market

and its participants.

In line with international best practices, efforts will be undertaken for the National Clearing Company

(NCCPL) to function as Central Counter Party with the establishment of a settlement guarantee fund;

and consolidation of risk management at NCCPL.

To ensure clear segregation of roles and responsibilities between the apex and the frontline regulators

to strengthen the SRO status of the market institutions, the SECP and the stock exchanges are in the

process of jointly identifying such roles and responsibilities and enter into a Memorandum of

Understanding. A phased approach would be adopted whereby exchanges would be gradually assigned the

responsibilities with sufficient oversight and guidance to ensure a smooth transition towards the SRO

status while protecting the public interest in general and investor confidence in particular.

With the intention of strengthening the market intermediaries through appropriate risk management,

a “Revised Brokers‟ Regime” for intermediaries of stock and commodity exchanges is in the development

stages. The said regime aligns with the IOSCO Principles for market intermediaries and is based on the

recommendations of the Consultative Group on Capital Markets. The said regime inter alia provides for

enhanced capital adequacy requirements and a code of conduct for the market intermediaries.

For developing the commodities market, the SECP may explore the possibility of allowing new

commodity exchanges to function in the country, as presently the potential offered by this market segment

is not being utilized to the maximum.

For developing an Islamic capital market in line with global best practices, the SECP is contemplating

the establishment of a Shariah Board comprising of eminent Islamic scholars and market professionals to

ensure that all products/services offered under this umbrella are in conformity with the Shariah

principles.

Regarding new product/system development, the future SECP agenda cross-listings of derivatives

based on foreign indices at Pakistani stock exchanges to boost activity in index futures market.

To accelerate growth in the debt market in coordination with relevant stakeholders, the possibility of

listing of government debt instruments at the stock exchanges will be explored and integration of National

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Savings Scheme instruments into the mainstream capital market.

To promote transparency and price discovery of debt securities and to minimize pricing issues of debt

securities, establishment of an independent Bond Pricing Agency (BPA) conforming to international

standards, is in the pipeline. The BPA is expected to contribute towards stimulating activity in the

primary and secondary debt markets, increasing market depth, reducing information asymmetry,

increasing credibility of financial statements through accurate asset-liability valuation, product

development etc.

12 Philippines CMIC • CMIC was established for the primary purpose of reinforcing the confidence of the investing public in

capital market institutions and to promote a more active and vibrant market participation.

In early 2012, the (Philippine) Securities and Exchange Commission, having allowed CMIC to be spun off

into an independent entity, approved the latter‟s application for registration as self-regulatory

organization after it complied with the requirements, particularly the signing of a memorandum of

agreement with the Philippine Stock Exchange to address the following matters: a) to set out the protocol

among the officials and employees of the two entities in the handling of data and information necessary for

the effective surveillance and detection of trading-related irregularities and unusual trading activities; b)

to delineate jurisdiction on enforcement of listing, disclosure and trading rules; and c) to address concerns

over records of PSE-market regulation department and market integrity board and the cases and other

matters pending with these units.

As a self-regulatory organization, CMIC‟s primary mandate is to adopt and enforce rules, guidelines and

provisions of the Securities Regulation Code (“SRC”) applicable to the operations and dealings of the

trading participants of Philippine Stock Exchange. CMIC is committed to carry out its role as an

independent regulatory body in the capital market with unquestioned integrity and the highest ethical

standards.

On 12 March 2012, the Capital Markets Integrity Corporation Rules took effect. Under the CMIC Rules,

CMIC, among other matters, enforces compliance by trading participants and, in the proper case, by

issuers with the Securities Laws.

Thereafter, CMIC concluded the procurement of the surveillance system with Korea Exchange.

• The Philippine Stock Exchange is proposing Direct Market Access to investors in a strong bid to boost

participation in the Philippine stock market. Direct Market Access is an arrangement whereby a Trading

Participant's client is permitted to enter orders to buy or sell securities directly into the Philippine Stock

Exchange trading system or PSEtrade for queuing and matching without any manual intervention by the

trading participant.

.

13 Romania RSBA The Romanian National Securities Commission is continuously adapting the internal regulations in order

to insure a more transparent market, a better protection for the operators and the investors, against

unfair, abusive and fraudulent practices. One of its main roles is to promote trust in regulated markets

and in financial instruments investments and also fair and transparent operations of the regulated

markets. Another concern refers to preventing market manipulation and fraud and to ensure the integrity

of regulated markets and establishing standards of financial soundness and honest practice in the

regulated markets.

RNSC is also permanently adjusting the national regulatory framework according to the regulations

mandatory at the European Union level.

At the beginning of September, for example, RNSC has published a Regulation that transposes the

disposals of the Regulation (EU) no 236/2012 of the European Parliament and of the Council on short

selling and certain aspects of credit default swaps.

Another issue is implementing the Directive of the Euroepan Parliament and of the Council, ammending

Directive 2009/65/ec on the coordination of laws, regulations and administrative provisions relating to

undertakings for collective investment in transferable securities (UNCTIS) as regards depositary

functions, remuneration policies and sanctions. In July this year, in the Official Journal og the European

Union was published Regulationa No648 (EU)/2012 On OTC Derivatives, central Counterparts and Trade

Repositories, whose disposition ought to be intergrated in the national legislation of each member state.

RNSC has also published internal regulation for adapting the dispositions of the prospectus Directive.

14 Sri Lanka SEC Through the amendments to the SEC Act, the SEC envisages changes including wide powers for the

SEC to regulate demutualised stock exchanges, derivative exchanges, clearing corporations, futures

brokers, futures dealers, futures fund managers, corporate investment advisers,

financial planners and the unlisted bond market, in addition to the other market participants already

under regulation. The SEC will also be empowered to institute civil actions against capital market

offenders in order to disgorge investors who have incurred losses due to their actions.

The Unit Trust Code was amended and gazetted to enable the SEC to regulate exchange traded funds.

Developing a framework for the Investor Association of Sri Lanka to protect the minority shareholder

rights; the main feature of this Association is that it will be a body corporate having a legal personality

which can sue on behalf of investors.

The introduction of a preferential share allocation mechanism for retail investors to broad base share

ownership in Sri Lanka and to encourage increase participation of retail investors in mutual funds

licensed by the SEC

15 Thailand1 ThaiBMA Under the Thai Capital Market Development Plan, government and private sectors including ThaiBMA

70

have agreed to continue promotion of the Thai bond market in both the demand and supply sides of the

market by

1. Encouraging new products in the Thai bond market such as Inflation-linked bond for corporate, Sukuk

bonds and municipal bonds.

2. Promoting electronic trading platform

3. Promoting bond market to individual investors by providing training and developing website called

thaibond.com to assist individual investors. Thaibond.com will provide trading information and

issuance news.

4. Encouraging private sector, especially SME to raise fund through bond issues by easing bond issue

regulations, providing training and education and some privileges

5. Encouraging securities firms to participate more in bond market

6. Promoting government bond into Global index

7. Revising Tax rules for bond trading such as capital gain tax for individual

16 Thailand2 ASCO - Liberalization of trading fee and brokerage license by SET.

- SEC issued a regulation recently to ensure the availability and quality of securities companies‟

analyst reports for investors.

- SEC encourages ASCO to become SRO.

17 Turkey TSPAKB Classification of the Equities

In July 2010, CMB classified the listed equities into three groups (A, B and C) by considering some criteria

such as free float market capitalization and number of freely floating shares. Additionally, investment

trusts are also classified by considering their [Market Price/Net Asset Value] ratio. While Group A

represents most of the equities traded, Group B and C correspond to less liquid ones.

In accordance with the classification, each group is subject to different trading rules. Group A and B

shares are traded through continuous auction, whereas Group C shares are traded by single-price auction

method. Within Group C, equities in the Watch List Market are traded twice a day in the afternoon. Other

Group C shares are traded at four single-price sessions during the day. Only Group A shares can be used

for margin trading and short selling.

Additionally, investors, who want to buy equities from groups B and C, have to be informed about the risks

by brokerage firms before trading these shares for the first time.

On the other hand, while disclosure of price level is 5 for A and B groups shares, only last price is shown

for Group C shares, except for investment trusts.

Emerging Companies Market (ECM)

The Emerging Companies Market was established as a separate market on the ISE in October 2010 for

SMEs. A market advisor mechanism is introduced for ECM to assist the company for the application to the

ECM. Market advisors have to provide advisory services to the company for compliance with the capital

markets regulations.

18 UAE (DIFC) DFSA NASDAQ Dubai has outsourced its trading, clearing and settlement and custody systems to its parent the

Dubai Financial Market, which enjoys are large retail investor base. The market model of the DFM

accommodates individual investor account structure for retail investors and provides a large liquidity pool

as well as omnibus accounts held with custodians on behalf of institutional clients.

19 Vietnam VBMA - Ministry of Vietnam prepare the roadmap to develop Vietnam Bond Market from 2012 util 2020.

- Important legal documents was issued in 2011 such as: Decree 01/ND-CP/2011 on Government Bond

Issuance and Decree 90/ND-CP/2011 on Cooperate Bond Issuance.

- More frequent big lot bond issuance reducing the total outstanding bond numbers: Numbers of

outstanding bonds: 477 bond codes (slightly down compared to around 520 codes in 2010)

- More frequent dialogs between regulators and market participants

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V – 5. Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

No. Country Name of

Organization

Measures to Invite Foreign Investment (De-regulation, Promotion Activities, etc.)

1. Cambodia SECC According to the Sub-decree on Tax Incentive in the Securities Sector, issuing company/listed company

and securities investors can receive the tax incentive as follow:

- Tax Incentives on Profit Tax for Equity and / or Debt Securities Issuing Companies

Equity and/or Debt Securities Issuing companies approved by the SECC and listed on the permitted

Securities Market shall fulfill the form and submit to the General Department of Taxation through SECC

in order to grant the incentives by reducing 10% of total amount of tax on profit to be paid for three (03)

years which shall be calculated from:

1. The beginning of the taxable year of securities issuance within the first six (6) months of the

taxable year.

2. The beginning of the taxable year after the taxable year by which securities are issuedwithin the

last six (6) months of the taxable year.

- Tax incentives on Withholding Tax for Securities Investors.

Public Investors shall gain fifty (50%) percent deduction of withholding tax on interest and/ or dividend

with derives from holding and/ or buying-selling the government securities, equity securities and debt

securities for the period of three (03) years counting from the opening of securities market.

2 China SAC 1. On December 16, 2011, CSRC, the People‟s Bank of China and State Ministration of Foreign Exchange

jointly released “Trial Measure for Fund Management Companies, Securities Companies RMB Qualified

Foreign Institutional Investors in Domestic Security Investment”. RQFII trial business set out formally.

The State Council of the people's Republic of China firstly approved the investment amount of 20 billion.

2.China speeds up its QFII qualification approvals and suitably lowers its QFII qualification standards to

overseas institutions.

3 India ANMI Steps to accelerate the process of further Economic growth and development

Provide a conducive environment for investment

Clarity in various laws governing the investment

Speed in according various approvals

Ensure required infra-structure to support the development process

4 Indonesia APEI The upgraded to become Investment Grade for the Country (FITCH Rating Agency)

Promoting the Capital Market Industry through various International Expos and Events

Increasing security measures for investors through introductions and improvements of various

rules and regulations of the Capital Market

Enhancement of the infrastructure system to be more efficient and effective

Enhancement of cooperation withthe regional exchanges that will provide quality of procedure

and rules of the game

5 Japan JSDA The JSDA has produced a short video titled "Japan: Touch Point for Global Growth", which is intended to

introduce the possibilities and attractions of Japan and its capital market targeting foreign investors and

overseas market related parties as audience.

The video presents advantages and future potentials of Japan and its capital market, featuring interviews

with leading pioneers and experts in seven key areas.

6 Kazakhstan FSC n/a

7 Laos SECO SEC has formulated a regulation on the Management of Foreign Investors in Securities Market in Lao

PDR and currently studying the establishment of custodian bank in order to facilitate the investment of

foreign investors.

8 Malaysia ASCM Now in its 8th year, Invest Malaysia organised annually by Bursa Malaysia was held in May 2012, with

the theme for 2012 being the continuation of Malaysia‟s transformation journey, introduced in Invest

Malaysia 2010, culminating in the Economic Transformation Programme unveiled in October 2010 and

which is now into its second year of implementation.

Invest Malaysia 2012 will focus on the progression of Malaysia‟s transformation – showcasing the detailed

deliverables that have and will positively impact the Malaysian economy and capital market.

Apart from the country‟s transformation, Invest Malaysia 2012 will also introduce ASEAN as a sub-theme

as the region moves closer towards economic integration by 2015, as targeted under the ASEAN Economic

Community (AEC) blueprint. The AEC envisages a single market and production base, a highly

competitive economic region which is fully integrated into the global economy.

The IM 2012 will showcase over 30 Malaysian corporates over a period of 2 days. IM 2012 invites you to

explore, discover, update, expand and broaden investment opportunities in Malaysia, the heart of ASEAN.

Invest Malaysia : Key Objectives for Investors

- Be the first to hear groundbreaking key developments in the Malaysian capital markets that will be

announced

- Unrivalled access to regulators and policy makers

- Unparalled access to CEOs, CIOs and Senior Management of leading Malaysian PLCs

- Network with policy makers and industry leaders to gain insights for informed investment decisions

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Invest Malaysia 2012 Event Highlights

- Plenary sessions with Keynote Address by the Prime Minister of Malaysia and guest speakers as

well as thought provoking panel discussions

- Profile leading companies across key sectors in corporate presentations across three conference

tracks

- Profile leading companies across key sectors in one-on-one and small group meetings

9 Mongolia MASD We should together do the following measures as:

Develop trust services and investment funds to attract foreign investors.

Decrease tax rate. Now tax rate for foreign investors is 20%.

Provide standards and requirements for public disclosure of information.

10 Myanmar CBM Not yet

11 Pakistan SECP Market Accessibility Criteria

Openness to foreign ownership

No distinction is made between local and foreign investors in Pakistan and they are treated at par

with local investors across all sectors without any special registration and/or licensing

requirement.

There are no foreign ownership limits in Pakistan and foreign investors may purchase upto 100%

shareholding in a listed security through the secondary market. However, prior approval of the

relevant regulator will be required for purchase of securities of companies in the financial sector,

beyond a certain threshold. In case holding exceeds 10% of the outstanding securities of a listed

company, only reporting is required for all investors irrespective of their categories in accordance

with relevant regulatory requirements.

Foreign investors are given equal treatment in respect of economic and voting rights. As per the

market norms, all information including corporate actions is generally disseminated in English

language.

Ease of capital inflows / outflows

Non-residents are allowed to trade freely in the securities including debt instruments and other

derivatives products available for trading on the Stock Exchanges of Pakistan.

Foreign investors are free to invest and move out capital, capital gain on investments and

dividends easily at their discretion without bearing additional cost in the form of tax on foreign

outflows or expropriation of funds by the government.

For portfolio investment, the non-residents are required to open Special Convertible Rupee

Account (SCRA) with any Authorised Dealer in Pakistan.

The fund available in such special accounts can be transferred outside Pakistan or credited to a

foreign currency account maintained in Pakistan at any time without prior approval of the State

Bank.

These accounts can also be credited with dividend income. Transfers from one such account to

another may also be made in case of transfer of shares between the two account-holders.

12 Philippines CMIC 1. Promoting and participating in regional initiatives;

2. Simplifying direct foreign investment procedures/processes;

3. Upgrading private and public infrastructure and being at par with international standards;

4. Reducing cost in doing business;

5. Utilizing Filipinos‟ advantage/strength in English as second language;

6. Broadening the database;

7. Liberalizing of exchange controls; and

8. Improving connectivity with foreign counterparties.

13 Romania RSBA Permanent contact with members of the Parliament, the Government and those of other institutions in a

position to create lobby for investing in the local stock exchange.

Recently, the Stock Brokers` Association has organized for its members working trips to three European

Security Exchanges, during which our members had the opportunity to discuss not only with their

colleagues, but also with representative of potential investor – companies, investment funds, financial

institutions.

Another important method of attracting foreign investors is adapting the national legislation to the

European and international ones, giving more facile access for those who want to extend their portfolios to

the financial instrument available on the Romanian capital market.

14 Sri Lanka SEC Capital Gains are tax free

Foreign investment process streamlined through opening a single account called the “SIA Account” (for

Sri Lanka Government securities, equity, corporate bonds and unit trusts)

Dividends and capital invested freely repatriable – no exchange controls

Foreign investment allowed in Sri Lanka Government securities, up to a maximum of 12.5% of the

outstanding stock

Foreign investment allowed in listed corporate bonds, up to a maximum of 50% of the issue size

100% foreign equity ownership is allowed in most areas of the economy

Foreign investment now allowed in all unit trusts/investment trusts/mutual funds

Showcasing the investment opportunities in the Sri Lankan capital market through international

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investor forums : Investor forums were held in London (in partnership with the London Stock

Exchange and Bloomberg UK), Malaysia (in association with the CIMB Group) and Singapore in 2011

and in Tokyo in 2012

Launch of the S&P Sri Lanka 20 Index for local and foreign investors to gauge the performance of Sri

Lankan equity market and for creating a Sri Lankan equity benchmark capable of supporting index

linked financial products

Facilitating the fast tracking of the implementation of a margin based Risk Management System for

both the CSE and Broker Firms (phase I), establishing a suitable Delivery-versus-Payment (DvP)

mechanism for stock market transactions (phase II), and a Clearing Corporation for central counter

party guarantee (phase III) together with the CSE

Enabling the necessary requirements for an elevation to the MSCI Emerging Markets Index which

remains the best option to attract foreign portfolio investments into Sri Lanka

Facilitating the demutualisation of the CSE : the Cabinet of Ministers in Sri Lanka approved the

demutualisation of the CSE which will be by way of a special Act

Facilitating the establishment of a full-fledged multi-asset class commodities and derivatives

exchange in Sri Lanka

15 Thailand1 ThaiBMA -Double Tax Treaty to exempt withholding tax on capital gain/interest for foreign investors who buy Thai

government bonds.

-Not subject to capital control measures if go for direct investment.

-ASEAN Economic Community (AEC)

16 Thailand2 ASCO - Reduction of corporate income tax from 30% to 23% and finally to 20% in 2013.

- Create Thailand branding to promote 5 major industries consisting of healthcare, tourism, food &

agriculture, energy, and telecommunications.

- Improve measures of foreign investment promotion, e.g. provide tax incentives to those who set up

regional offices in Thailand, etc.

17 Turkey TSPAKB With collaboration of CMB, ISE, TurkDEX and other capital market institutions, international events

were organised to introduce the Turkish capital markets to foreign investors and institutions. In 2010 and

2011, two activities were organized respectively in South Korea and Taiwan.

18 UAE (DIFC) DFSA The DFSA has worked closely with NASDAQ Dubai as well as the local securities regulator, the Emirates

Securities and Commodities Authority (SCA) to implement enhancements to the clearing and settlement

model used on NASDAQ Dubai and its parent the Dubai Financial Market. The DFSA his working closely

with the SCA, NASDAQ Dubai and the UAE exchanges to meet the qualifying criteria for an upgrade to

„emerging market‟ status by MSCI. Work on this issue is ongoing. An upgrade to emerging market status

of UAE is expected to encourage the participation of foreign investment (funds) in the UAE Markets.

Whilst there are no restrictions on foreign ownership in the DIFC, the existing UAE Companies Law

stipulates a UAE ownership of at least 51% of all companies. However a revised UAE Companies Law has

recently been signed into effect by the President of the UAE which proposes a revision of foreign

ownership limits for certain businesses. The revised Companies Law is yet to be released to the public.

19 Vietnam VBMA - Continue to implement the Resolution 11 in a stable and effective way to reset three macroeconomic

indices of inflation, forex rate and foreign reserve.so that foreign investor will come back to buy the bond.

- MOF should consider to exempt withholding tax on capital gain/interest for foreign investors for those

one invest in G Bond.

- Investor Conference to communicate with Foreign Investor.