LAW OF UKRAINE

On Depository System of Ukraine

This Law determines legal norms for functioning of the depository system of Ukraine, establishes procedure of registration and confirmation of rights in eligible securities and their entitlements within the securities depository record-keeping system as well as settlement procedure of eligible securities transactions.

Section I GENERAL PROVISIONS

Article 1. Definition of terms

1. For the purposes of this Law, the terms herein are used in the meaning as follows:

1) securities account owner – an entity having a securities account opened with a professional participant of the depository system of Ukraine and/or the National Bank of Ukraine;

2) global certificate – a document covering information on the securities issue, drawn up by the issuer after securities issuance, safe-kept by the Central Securities Depository (hereinafter referred to as the Central Depository), and in cases outlined by this Law – by the National Bank of Ukraine, and serving the grounds for safekeeping and record-keeping of relevant securities as well as record-keeping of issuer’s obligations arising from securities of the corresponding issue;

3) cash settlements – a transfer of funds performed according to the law;

4) correspondent depository – a foreign state’s depository or an international depository and clearing institution being a client of the Central Depository on the grounds of established links in regard to securities;

5) depository activity – an activity of professional participants of the depository system of Ukraine and the National Bank of Ukraine associated with securities safekeeping and record-keeping, record-keeping and servicing of acquisition, termination and transfer of rights in securities and securities entitlements as well as restriction of rights in securities on securities accounts opened for depository institutions, issuers, correspondent depositories, entities engaged in clearing activity, the Settlement Center servicing transactions on financial markets (hereinafter referred to as the Settlement Center), depositors as well as rendering other services by professional participants of the Ukrainian depository system that are deemed legal according to this Law;

6) depository system of Ukraine – a group of depository system participants and legal relations between them in regard to record-keeping of securities, rights in securities and securities entitlements as well as their restrictions; the latter are being set within the securities depository

record-keeping system, including cases when restrictions are set as the result of settlement of securities transactions;

7) depositor – a securities owner, securities co-owners, a notary having a deposit credited with securities (a securities account is opened with a depository institution on the grounds of the relevant agreement on securities account servicing) as well as a depository institution, which opens itself a securities account on the grounds of an order of this depository institution’s manager. The National Bank of Ukraine can be a depositor in cases stipulated by this Law;

8) crediting of securities – an increase of a certain issue securities’ amount on a securities account of such account owner accompanied by an input of a certain amount of depository assets of this issue by depository system professional participant or the National Bank of Ukraine;

9) issuer’s obligations arising from securities of own issue – an issuer’s liability to fulfill certain activities in favor of an entity having rights in such issue’s securities (content and volume of such activities are defined by the current legislation and/or issuer’s decision) or restrain from certain actions;

10) material participation in the Central Depository – a direct and/or an indirect ownership of 1 and more percentages of the Central Depository’s authorized capital by an entity (with the exception of the state and the National Bank of Ukraine) independently or together with related entities;

11) issuer’s corporate actions – issuer’s actions related to issuance, buy-back, split, consolidation, conversion, redemption, cancelation, securities proceeds payment as well as actions related to issuer’s termination, change of issuer’s authorized capital, and other actions according to the list defined by the National Securities and Stock Market Commission (hereinafter referred to as the Commission);

12) transfer of securities (rights in securities and/or securities entitlements) – a movement of a certain securities amount (rights in securities and/or securities entitlements) that reflects transition of securities (rights in securities and/or securities entitlements) of a relevant issue from one securities account to another securities account in the professional participant of the depository system or the National Bank of Ukraine provided depository asset volume of the issue is unchanged, or performance of operations related to imposing and removing limitations on rights in securities and/or securities entitlements;

13) rights in securities — proprietary rights in securities (ownership, other proprietary rights defined by the law);

14) securities entitlements — rights, arising from issuer’s obligations for the placed securities (a right to participate in shareholders’ general meetings, a right to receive proceeds, other rights, defined by the law and/or issuer’s decision);

15) professional participants of the depository system of Ukraine — the Central Depository, depository institutions;

16) register of registered securities owners — a list of registered securities owners, drawn up by the Central Depository with accordance to legislative requirements, or in cases, provisioned by this Law, — by the National Bank of Ukraine as of a certain date, indicating the number of registered securities, owned by certain owners, nominal value as well as type of securities and other information, defined by the Commission;

17) settlement of securities transactions — settlement of mutual obligations with regard to securities transactions via cash and/or securities transfer and/or transfer/debiting/crediting of rights in securities and securities entitlements and/or netting of obligations.

18) settlement according to the principle “securities delivery versus payment” — a mechanism of securities transactions settlement, which assumes that securities and/or rights in securities and securities entitlements are transferred immediately after the corresponding cash transfer;

19) debiting of securities (rights in securities and/or securities entitlements) — a decrease in the amount of securities (rights in securities and/or securities entitlements) of a certain issue on a securities account of such account owner, which is accompanied by withdrawal (removal) of a certain amount of depository assets of this issue from a professional participant of the depository system or the National Bank of Ukraine;

20) securities settlement — a securities transfer and/or transfer/debiting/crediting of rights in securities and securities entitlements, which is performed according to the procedure, provisioned by law;

21) temporary global certificate — a document containing information about a securities issue, which is offered for placement, drawn up by an issuer for the period of securities issuance, safe-kept by the Central Depository, and in cases, defined by the law, — by the National Bank of Ukraine, and serves a ground for recording securities and issuer’s obligations arising from securities of the corresponding issue;

22) participants of the depository system of Ukraine — the National Bank of Ukraine, professional participants of the depository system of Ukraine, correspondent depositories, stock exchanges, clearing institutions, the Settlement Center, issuers, securities traders, asset management companies, and deponents.

Terms “control” and “related entities” are used in the meaning, provided in the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets”.

Terms “clearing”, “netting” and “central counterparty” are used in the meaning, provided in the Law of Ukraine “On Securities and Stock Market”.

Article 2. Legislation on depository system of Ukraine

1. Legislation on Ukrainian depository system includes a Civil Code of Ukraine, this Law, the Law of Ukraine ‘On Securities and Stock Market’, other laws of Ukraine as well as legal and regulatory acts of the Commission and the National Bank of Ukraine.

2. If an international treaty of Ukraine (consent to be bound by which has been given by the Parliament) stipulates provisions other than envisaged in this Law, provisions of international treaty are applied.

Article 3. Types of depository activity and their combination

1. The following types of depository activity can be carried out in Ukraine:

1) depository activity of the Central Depository;

2) depository activity of the National Bank of Ukraine;

3) depository activity of a depository institution;

4) activity related to safe-keeping of mutual fund assets;

5) activity related to safe-keeping of pension fund assets.

2. Depository activity of a depository institution can be combined with activity related to safe-keeping of mutual fund assets and pension fund assets.

Activities stipulated by items 3 – 5, abstract 1 of this article, can not be performed by the Central Depository.

Activities stipulated by items 3 – 5, abstract 1 of this article, can be performed by the National Bank of Ukraine in cases stipulated by law.

Depository activity of a depository institution can be combined with an activity related to securities trading and/or banking activity.

Depository activity of the Central Depository can be combined with a clearing activity in cases defined by the Commission.

Depository activity of the National Bank of Ukraine can be combined with a clearing activity.

Depository activity (with the exception of the depository activity of the National Bank of Ukraine) can only be combined with the types of activity stipulated in this Law.

Combination of types of depository activity is possible provided activities are performed by depository institution’s separate structural units in keeping with the procedure defined by the Commission.

Article 4. System of securities depository record-keeping

1. System of securities depository record-keeping – an accumulation of information, entries on eligible securities (a kind with indication of a type, nominal value and number, circulation limitation etc.) on securities accounts of such accounts’ owners, on issuers, securities owners disposing securities entitlements and rights in securities, on limitation of rights in securities, authorized persons, managers, pledge holders, other persons vested with the corresponding rights in regard to securities; information contains data allowing identification of eligible securities and the aforementioned persons, a register of securities codes (ISINs) as well as other information stipulated by law (hereinafter referred to as the depository record-keeping system).

Requirements as to a list of documents submitted by the issuer to the Central Depository, and in cases stipulated by this Law – to the National Bank of Ukraine, as well as a procedure of drawing up and keeping records of global certificates, temporary global certificates and their essentials are defined by the Commission, and in cases stipulated by this Law – by the National Bank of Ukraine.

2. Rights in securities and securities entitlements are acquired and terminated by means of recording the relevant fact within the depository record-keeping system. Limitations of rights in securities are registered within the depository record-keeping system. Securities entitlements’ limitations can be registered within the depository record-keeping system in cases and in keeping with a procedure defined by the Commission.

Requirements as to information inputted into the depository record-keeping system is set by the Central Depository upon the Commission’s approval.

Article 5. Securities accounts

1. On the grounds of an agreement on securities account servicing a securities owner, securities co-owners or a notary having a deposit credited with securities as well as a depository institution itself (on the grounds of an order of this depository institution’s manager) or the National Bank of Ukraine opens a depositor’s securities account with a depository institution in keeping with the legislation.

An agreement on securities account servicing is concluded between a depositor and a depository institution; according to the agreement and in keeping with a procedure defined by the Commission a depository institution keeps records on a securities account of securities possessed by an owner, securities co-owners, a corresponding creditor provided a notary’s deposit has been credited with securities and also keeps records of the aforementioned entities’ rights in securities accounted on a certain securities account as well as limitation of such rights.

A depository institution keeps records of securities belonging to it on the ownership right on its own securities account in keeping with a procedure defined by the Commission (the National Bank of Ukraine – in keeping with a procedure defined by itself upon the Commission’s approval) as well as records of rights in such securities and such rights’ limitations.

Once securities have been credited into a notary’s deposit – to a corresponding creditor, a depositor collectively disposes of all rights in securities and securities entitlements accounted on a depositor’s securities account.

A number of rights in securities as well as securities entitlements on a depositor’s securities account shall be even and positive.

On the grounds of a legal act stipulated by law a securities owner, securities co-owners can delegate its/their powers as to securities account opening to another entity authorized to act on his (their) behalf.

Upon opening a depositor’s securities account a depository institution assigns to a securities owner a securities owner’s code in keeping with a procedure defined by the Central Depository upon the Commission’s approval.

2. On the grounds of a depository agreement a depository institution opens a depository institution’s securities account (on which securities shall be safe-kept and recorded) with the Central Depository or in cases stipulated by this Law – with the National Bank of Ukraine.

Securities, which entitlements and rights in which belong to depositors of such depository institution (in case securities are credited to a notary’s deposit – to a corresponding creditor), are safe-kept and recorded on a depository institution’s securities account on the grounds of a depository agreement in keeping with a procedure defined by the Commission, and in cases stipulated by this Law – by the National Bank of Ukraine.

A number of securities on a depository institution’s securities account shall be even and positive.

A depository agreement is concluded between a depository institution and the Central Depository or between a depository institution and the National Bank of Ukraine; according to

the agreement and in keeping with the terms of reference covered by this Law, the Central Depository and/or the National Bank of Ukraine on a depository institution’s securities account safe-keeps and records securities, which entitlements and rights in which belong to depositors of such a depository institution (in case securities are credited to a notary’s deposit – to a corresponding creditor) as well as to a depository institution itself or the National Bank of Ukraine – in regard to securities owned by such a depository institution.

3. On the grounds of an agreement on securities issues servicing an issuer opens an issuer’s securities account with the Central Depository or in cases stipulated by this Law – with the National Bank of Ukraine.

Securities of the issuer’s own issues and limitations of rights in securities are safe-kept and recorded on an issuer’s securities account on the grounds of an agreement on securities issues servicing in keeping with a procedure defined by the Commission, and in cases stipulated by this Law – by the National Bank of Ukraine.

A number of securities on an issuer’s securities account shall be even and positive.

An agreement on securities issues servicing is concluded between an issuer and the Central Depository or between an issuer and the National Bank of Ukraine; according to the agreement and in keeping with the terms of reference covered by this Law, the Central Depository or the National Bank of Ukraine provides services in regard to issuer’s corporate actions.

4. A correspondent depository opens a securities account with the Central Depository or the National Bank of Ukraine on the grounds of an agreement on correspondent relations.

On the grounds of an agreement on correspondent relations securities, which entitlements and rights in which belong to a correspondent depository’s clients (depositors), are accounted on a correspondent depository’s securities account in keeping with a procedure defined by the Commission.

A number of securities on a correspondent depository’s securities account shall be even and positive.

An agreement on correspondent relations is concluded between a correspondent depository and the Central Depository or the National Bank of Ukraine; according to the agreement and in keeping with a procedure defined by the Commission, the Central Depository or the National Bank of Ukraine keeps records on a correspondent depository’s securities account of securities, which entitlements and rights in which belong to a correspondent depository’s clients (depositors).

An agreement on correspondent relations may also stipulate a procedure of cash transfer between the Central Depository or the National Bank of Ukraine and a correspondent depository to cover cases of an issuer’s corporate actions and other cases stipulated by the law.

5. On the grounds of a depository agreement on account opening the National Bank of Ukraine opens a securities account with the Central Depository.

Peculiarities of securities record-keeping on the account opened by the National Bank of Ukraine with the Central Depository is defined by the Commission upon the approval of the National Bank of Ukraine.

6. On the grounds of an agreement on servicing a clearing institution and the Settlement Center a clearing institution and the Settlement Center opens a securities account with the Central Depository and/or the National Bank of Ukraine.

An agreement on servicing a clearing institution and an agreement on servicing the Settlement Center is concluded between the aforementioned entities and the Central Depository; according to the agreement and in keeping with a procedure defined by the Commission, the Central Depository keeps records on securities accounts of a clearing institution and the Settlement Center of securities, used by such an entity to build a risk management system and guarantee fulfillment of obligations under agreements related to securities within the terms of reference stipulated by this Law.

An agreement on servicing the Settlement Center is concluded between the latter and the National Bank of Ukraine; according to the agreement and in keeping with a procedure defined by the National Bank of Ukraine upon the Commission’s approval, the National Bank of Ukraine keeps records on the Settlement Center’s securities account of securities, used by such an entity to build a risk management system and guarantee fulfillment of obligations under agreements related to securities within the terms of reference stipulated by this Law.

7. Requirements towards the abovementioned agreements, including rights and obligations of parties to an agreement, are set by the Commission, excluding cases when a party to an agreement is the National Bank of Ukraine.

If the National Bank of Ukraine is a party to the abovementioned agreements, upon the Commission’s approval the National Bank of Ukraine sets requirements towards such agreements, including rights and obligations of parties to an agreement.

The procedure of opening, maintenance and closing of accounts of depository institutions, issuers, correspondent depositories and entities carrying out clearing activity as well as of depositors is defined by the Commission and in cases stipulated by this Law – by the National Bank of Ukraine upon the Commission’s approval.

Article 6. Securities depository record-keeping

1. Securities depository record-keeping – keeping records of securities, rights in securities as well as their limitations on securities accounts (hereinafter referred to as the depository record-keeping).

Within the depository system of securities record-keeping depository records are kept in quantitative terms.

Herewith, records of a certain owner’s rights in securities are kept only by depository institutions, in cases stipulated by this Law – by the National Bank of Ukraine, and correspondent depositories or their clients; records of securities and their entitlements are kept only by the Central Depository or the National Bank of Ukraine.

On the grounds of a deposited global and/or temporary global certificate records of issuer’s obligations arising from securities of the issuer’s own issues are kept by the Central Depository and in cases stipulated by this Law – by the National Bank of Ukraine, in regards to each securities issue.

2. In keeping with a procedure defined by the Commission changes into the depository records in regard to securities of a certain owner are introduced exclusively by depository institutions (in cases stipulated by the law – by the National Bank of Ukraine or correspondent depositories) on the grounds as follows:

Information submitted by the Central Depository upon any transaction executed on a stock exchange in regard to securities, records of which are kept by the Central Depository according to the terms of reference established by this Law;

Information submitted by the National Bank of Ukraine upon any transaction executed on a stock exchange in regard to securities, records of which are kept by the National Bank of Ukraine according to the terms of reference established by this Law;

An instruction submitted by each depositor that is a participant of the transaction – in case a FOP securities transaction is executed OTC by depositors of a single depository institution;

An instruction submitted by a depositor and the Central Depository or the National Bank of Ukraine – in case a FOP securities transaction is executed OTC by depositors of different depository institutions;

An instruction and other documents (in cases defined by the Commission) submitted by a depositor – in cases when limitations of rights in securities and securities entitlements in regard to this depositor’s rights are imposed or released.

Documents defined by the Commission in cases covering inheritance, succession or in other cases defined by the Commission;

A decision of a court or an authorized state agency or its senior official.

In keeping with a procedure, terms and volumes defined by the Central Depository upon the Commission’s approval, the Central Depository reflects information on all operations performed on depositors’ securities accounts opened with every depository institution.

3. The Central Depository or the National Bank of Ukraine (according to the terms of reference established by this Law) introduces changes into the depository record-keeping system upon settlement of DVP securities transactions executed on stock exchanges or OTC; in keeping with a procedure defined by the Commission on the grounds of information submitted by the Settlement Center (information submitted by a stock exchange in case clearing activity is exercised by the Central Depository) depository institutions and/or correspondent depositories subsequently reflect (upon necessity) such changes on securities accounts.

In keeping with a procedure and terms defined by the Commission the Central Depository or the National Bank of Ukraine confirms receipt of the aforementioned information.

4. In keeping with a procedure defined by the Commission, the Central Depository exclusively introduces changes into the depository record-keeping system in regard to the whole securities issue, records of which are kept by the Central Depository (according to the terms of reference established by this Law) on the grounds as follows:

Information submitted by a securities issuer upon issuer’s corporate actions, apart from the case when securities placement transactions are executed on a stock exchange. In this case, in keeping

with a procedure and terms defined by the Commission the Central Depository confirms receipt of the aforementioned information from a stock exchange;

A decision of a court or an authorized state agency or its senior official.

5. In keeping with a procedure defined by itself and approved by the Commission, the National Bank of Ukraine exclusively introduces changes into the depository record-keeping system in regard to the whole securities issue, records of which are kept by the National Bank of Ukraine (according to the terms of reference established by this Law) on the grounds as follows:

Information submitted by an issuer upon issuer’s corporate actions (apart from the case when securities placement transactions are executed on a stock exchange);

A decision of a court or an authorized state agency or its senior official.

6. In case when limitations of rights in securities in regard to a certain owner’s securities are imposed or released, such a securities owner submits the corresponding information and documents verifying the information to the depository institution, with which he has opened a securities account.

In case when limitations of rights in securities in regard to a certain owner’s securities are imposed or released, a court or an authorized state agency or its senior official submits the corresponding decision to the depository institution, with which the owner has opened an account.

In case when limitations of rights in securities in regard to the whole securities issue are imposed or released, a court or an authorized state agency or its senior official submits the corresponding decision to the Central Depository or the National Bank of Ukraine (according to the terms of reference established by this Law).

7. A procedure of submitting instructions and other documents related to securities (stipulated by the second and sixth parts of this article), requirements towards their content (apart from requirements towards a court decision) as well as a procedure of their registration within the depository record-keeping system is defined by the Commission; in regard to securities, records of which are kept by the National Bank of Ukraine according to the terms of reference established by this Law – by the National Bank of Ukraine upon the Commission’s approval; in regard to a procedure stipulated by the third and fourth parts – by the Commission, in regard to a procedure stipulated by the fifth part – by the National Bank of Ukraine upon the Commission’s approval.

The aforementioned documents serving the grounds for introducing changes into the depository record-keeping system shall be kept during 5 years from the day of their receipt and until a corresponding account is closed.

8. In cases stipulated by law, a depository institution shall inform on the instruction’s acceptance for execution or provide a reasonable response as to its refusal to execute an instruction not later than on the business day following the day, on which a depositor’s instruction and other documents have been received. If an instruction is accepted for execution, a depository institution introduces changes into the depository record-keeping system in keeping with the instruction’s requirements.

If a depository institution receives from the Central Depository or the National Bank of Ukraine information resulting from settlement of DVP securities transactions executed on a stock exchange or OTC, such depository institution’s depositors or a depository institution for their benefit introduces changes into the depositors’ corresponding securities accounts by the end of the current operational day, during which the aforementioned information has been sent by the Central Depository or the National Bank of Ukraine.

Article 7. Introducing changes into the depository record-keeping system in regard to lien on securities or other limitation of rights in securities of a certain

owner imposed by a decision of a court or an authorized state agency

1. Lien on securities or other limitation of rights in securities of a certain owner (hereinafter referred to as a limitation related to a certain owner) is imposed (levied) and cancelled (released) in keeping with a procedure established by this article on the grounds of a decision of a court or an authorized state agency or its senior official.

When a limitation related to a certain owner is imposed or cancelled a court or an authorized state agency or its senior official submits a corresponding decision to a depository institution with which such owner has opened a securities account as well as to the Central Depository or the National Bank of Ukraine – the one, which according to the terms of reference established by this Law keeps records of such securities.

2. A depository institution introduces changes in regard to a certain owner’s securities impacted by a limitation into the depository record-keeping system by the end of the business day, on which a corresponding decision has been received (apart from the case stipulated by the third part of this article).

3. If there is a limitation of rights in securities imposed according to such securities owner’s instruction for the purpose of their selling on a stock exchange, a depository institution postpones introduction of changes in regard to a certain owner’s securities impacted by a limitation into the depository record-keeping system to the next business day.

A depository institution submits information to the Central Depository or the National Bank of Ukraine respectively on its receipt of a corresponding decision of a court or an authorized state agency or its senior official on a limitation related to a certain owner on the same business day when such a decision has been received.

4. In keeping with the terms of reference related to securities record-keeping established by this Law, on the grounds of information on securities transactions executed on a stock exchange, received from the latter or from an entity exercising clearing activity (in case when clearing activity is exercised by the Central Depository or the National Bank of Ukraine), the Central Depository or the National Bank of Ukraine:

On the next day imposes limitation in regard to securities mentioned in the information on receipt of a corresponding decision of a court or an authorized state agency or its senior official to impose limitation related to a certain owner communicated by a depository institution to the Central Depository or the National Bank of Ukraine – in case information received from an entity exercising clearing activity or a stock exchange includes no data on executed securities transactions on a stock exchange (in case clearing activity is exercised by the Central Depository or the National Bank of Ukraine); hereby, the Central Depository or the National Bank of Ukraine informs a depository institution on the actions taken;

On the same business day informs a depository institution on availability of data on executed securities transactions on a stock exchange in the information received from an entity exercising clearing activity or a stock exchange (in case clearing activity is exercised by the Central Depository or the National Bank of Ukraine) regarding securities, for which a depository institution has received a corresponding decision of a court or an authorized state agency or its senior official to impose limitation related to a certain owner - if such information is available.

5. On the same business day, on which information stipulated by the fourth part of this article has been received, a depository institution:

Imposes limitation related to a certain owner on his securities account – in case of receipt of information stipulated by the second abstract, part four of this article;

On the grounds of information stipulated by the third abstract, part four of this article, imposes limitation related to a certain owner on a balance of securities, rights in which are accounted on his securities account as a result of a legal act; if the balance equals zero - leaves a corresponding decision of a court or an authorized state agency or its senior official to impose limitation related to a certain owner unexecuted.

6. During the next business day following a decision’s receipt, a depository institution informs a court or an authorized state agency or its senior official on actions taken as a result of receipt of a corresponding decision to impose limitation related to a certain owner.

Article 8. Confirmation of rights in securities and securities entitlements

1. Confirmation of rights in book-entry securities and book-entry securities entitlements as well as limitations of rights in securities at a given time is a register entry on a depositor’s securities account opened with a depository institution.

A documentary confirmation of available rights in securities and securities entitlements of a depositor (in case securities are credited to a notary’s deposit – of a corresponding creditor) at a given time is an extract from a depositor’s securities account issued by a depository institution upon a depositor’s request or in other cases stipulated by law and an agreement on servicing a securities account.

2. An extract from a securities account is not a security and its transmission from one person to another is not a securities transaction and does not result in a transfer of rights in securities and securities entitlements.

3. Requirements towards an extract from a securities account are defined by the Commission.

Part II

PARTICIPANTS OF THE DEPOSITORY SYSTEM OF UKRAINE

Article 9. The Central Depository

1. The Central Depository provides establishing and functioning of the system of securities depository record-keeping.

The Central Depository keeps records of all eligible securities except for securities, records of which are kept by the National Bank of Ukraine according to its terms of reference, stipulated by this Law.

Only one Central Depository can exist in Ukraine.

The words “Central Securities Depository”, “Central Depository” and originating from them can be legally used only by a legal entity, which has obtained a status of the Central Depository according to a procedure stipulated by this Law.

2. The Central Depository — a legal entity, functioning as a public joint-stock company according to the Law of Ukraine “On Joint-Stock Companies” considering peculiarities, defined by this Law. A joint-stock company obtains a status of the Central Depository on the day of the Central Depository’s Rules registration with the Commission according to the established procedure.

3. Shareholders of the Central Depository can be the state, the National Bank of Ukraine, stock market participants, central depositories of other countries, international depository and clearing institutions as well as international financial organizations, in which Ukraine participates.

If the shareholder’s stake in the Central Depository’s share capital together with related entities exceeds the amount indicated in the fourth part of this article, the abovementioned entity has no right to directly or indirectly, fully or partly use its voting right with regard to the shares, the number of which exceeds the amount indicated in the fourth part of this article.

If the Commission discovers such a fact, within two weeks from the moment of its discovery it appoints a trustee, which is granted with a right to participate in voting with regard to the shares, the number of which exceeds the amount indicated in the fourth part of this article.

According to a procedure, defined by the Commission, a trustee is appointed for the period of bringing the shareholder’s stake together with related entities in compliance with the fourth part of this article.

During voting a trustee shall act in the interests of a qualified and reasonable management of the Central Depository.

Decisions of the Central Depository’s shareholders’ general meetings, taken with violation of requirements, defined by this part, have no legal force.

4. In the Central Depository’s share capital the stake of:

one shareholder together with related entities shall not exceed 5 percent;

a central depository of other countries, an international depository and clearing institution or an international financial organization, in which Ukraine participates, shall not exceed 25 percent;

the state together with the National Bank of Ukraine shall not be less than 25 percent plus one share. The authority managing the state’s stake in the share capital of the Central Depository is defined by the Cabinet of Ministers of Ukraine.

5. The Central Depository shall not be liable for the shareholders’ and clients’ obligations. The Central Depository and its bodies cannot be imposed with any sanctions limiting their rights in case of shareholders’ or clients’ malpractice.

Shareholders shall not be liable for the Central Depository’s obligations. Shareholders cannot be imposed with any sanctions limiting their rights in case of the Central Depository’s or other shareholders’ malpractice.

6. To fulfill functions that fall under its terms of reference, the Central Depository can be a founder and a participant (shareholder) of legal entities upon the Commission’s approval. The Central Depository cannot be a founder and a participant (shareholder) of professional stock market participants and legal entities, organizational and legal form of which assumes full material responsibility of the founder (participant).

A procedure of calculating a ratio of the Central Depository’s capital adequacy, a minimum size of the Central Depository’s regulatory capital, and other restrictions of its activity are defined by the Commission.

7. By the time the Central Depository starts exercising depository activity, it shall register the Central Depository’s Rules with the Commission; the Central Depository’s Rules shall define a general procedure of the Central Depository’s provision of services related to depository activity, execution of transactions within the depository record-keeping system, exercising control over depository institutions by the Central Depository, and shall contain other information, defined by the Commission. The Central Depository’s Rules shall also contain a procedure of concluding a depository agreement between a depository and depository institutions.

The Central Depository’s Rules and changes introduced into the Central Depository’s Rules shall be subject to registration with the Commission according to its established procedure.

Minimal size of the Central Depository’s share capital shall exceed UAH 100 million.

In order to receive a status of the Central Depository a legal entity shall have appropriate equipment, including computer equipment with relevant software, certain communication channels, premises that comply with requirements defined by the Commission.

The Central Depository’s software and hardware shall correspond to the nature and volume of transactions performed as well as guarantee its smooth functioning. The Central Depository shall have main and backup software technological complexes. Moreover, software and hardware shall belong to the Central Depository on the ownership right.

8. Exclusive terms of reference of the Central Depository are as follows:

1) crediting securities (except securities within the terms of reference of the National Bank of Ukraine) to the depository record-keeping system, their record-keeping and safe-keeping as well as debiting as a result of securities redemption and/or cancelation;

2) keeping records of issuer’s obligations arising from own issues’ securities (except securities within the terms of reference of the National Bank of Ukraine) with regard to each securities issue on the grounds of depositing a global certificate and/or a temporary global certificate;

3) safekeeping of global certificates and/or temporary global certificates (except global certificates and/or temporary global certificates of securities issues within the terms of reference of the National Bank of Ukraine);

4) securities numbering (codification) according to international standards, keeping register of securities codes (International Securities Identification Numbers);

5) drawing up registers of registered securities owners (except securities within the terms of reference of the National Bank of Ukraine);

6) storing information on entities, selected to provide to an issuer a register of registered securities owners;

7) receiving income and other proceeds with regard to issuers’ transactions (including those that are placed and circulate outside Ukraine) on the account of the Central Depository, opened with the Settlement Center, for their further transfer to recipients;

8) opening and holding securities accounts for issuers, the National bank of Ukraine, depository institutions, correspondent depositories, clearing institutions and the Settlement Center;

9) holding a securities account of a depository institution which has terminated its depository activity or the relevant license of which has been cancelled because of malefaction in the securities market or in another case, defined by the Commission, as well as responsible safekeeping of documents, data base, backup database, archive database of a depository institution, information on those depositors that have not closed their securities accounts according to the established procedure, and securities which had been accounted on their accounts, and submission of information about the state of such accounts according to legislation;

10) establishing single unified rules (standards) of reflection and transference of information on securities recordkeeping and circulation, issuers’ corporate actions servicing and other information inputted into the depository record-keeping system;

11) introducing international standards on depository activity;

12) monitoring clients with regard to their depository activity according to a procedure and within a framework stipulated by this Law.

9. The Central Depository can render services to issuers on organizing and holding shareholders’ general meetings.

The Central Depository can execute certain banking transactions on the basis of a license for performing certain banking transactions, obtained according to a procedure, defined by the National Bank of Ukraine.

The Central Depository can perform other activities, which are not prohibited by the law.

10. Maximum and minimum fees for the Central Depository’s services can be set by the Central Depository upon the approval of the Commission and the Antimonopoly Committee of Ukraine.

11. According to a procedure and within the terms, defined by the Commission, the Central Depository shall publish the results of its activity and the ownership structure. The Central

Depository annually reports on the results of its activity during the Commission’s meeting according to the defined procedure and submits information on concluded correspondent agreements with correspondent depositories.

12. The Central Depository is obliged to perform annual audit of its activity according to international audit standards in keeping with requirements, defined by the Commission.

13. To provide payment of proceeds for securities, payment upon debt securities redemption, including securities that are placed and circulate outside Ukraine, or upon issuer’s other corporate events, the Central Depository opens a cash account with the Settlement Center. The Central Depository cannot have a lien on such cash to cover its own obligations as an economic agent.

14. To provide settlement of securities accounted on the Central Depository’s account with international depository and clearing institutions or to provide settlement of securities accounted on securities accounts opened by foreign depository and clearing institutions with the Central Depository, the Central Depository can open accounts with foreign financial institutions on the basis of a general currency license. In such cases the Central Depository performs functions of a currency control agent according to Ukrainian legislation.

Article 10. Arrangements on non-interference into the Central Depository’s activity

1. Interference of state authorities or officials into the Central Depository’s performance of its functions and powers is prohibited, except for cases, stipulated by this Law.

2. Removal (seizure) of material data carriers related to the Central Depository’s performance of securities depository record-keeping and transactions is prohibited.

Article 11. Registration of the Central Depository’s statute (changes to the statute) with the State

1. The Central Depository’s statute (changes to the statute) is registered with the State according to a procedure defined by the law after its approval by the Commission.

2. For the approval of the statute (changes to the statute) the Central Depository submits documents to the Commission according to a list and content defined by the Commission.

3. The Commission according to the defined procedure approves the statute (changes to the statute) or denies the approval within a month from the day of receiving the relevant documents.

If some documents are missing or the submitted documents have not been designed according to requirements defined by the Commission, they are returned within a month without being examined.

In case verification of information on foreign physical or legal institutions, data on which is included to the Central Depository’s ownership structure, is required, the term of documents examination can be extended up to two months.

4. The Commission has the right to:

receive information from the state authorities and other entities according to the law, which is required in order to take a decision related to the approval of the Central Depository’s statute (changes to the statute);

demand from the supplier to input corrections into the submitted documents during the period of documents examination (without its extension).

5. Provisions of this article are also used for approval of a statute of the entity, which intends to obtain a status of the Central Depository.

Article 12. Bodies of the Central Depository

1. Bodies of the Central Depository are the Shareholders’ General Meeting, the Supervisory Board, the Executive Board, and the Internal Audit Commission.

To provide consideration and protection of the depository system participants’ interests the Central Depository’s statute can envisage an establishment of the Depository System Participants’ Board, as a consultative body.

Members of the Supervisory Board are elected by the Shareholders’ General Meeting via cumulative voting.

The Central Depository’s Internal Audit Commission is elected by the Shareholders’ General Meeting among the shareholders or their representatives according to a procedure established by law.

The head and members of the Central Depository are appointed by the Shareholders’ General Meeting of the Central Depository.

A procedure of establishing and functioning of the Depository System Participants’ Board of the Central Depository is defined by the regulation on the Depository System Participants’ Board which is approved by the Shareholders’ General Meeting of the Central Depository.

2. The terms of reference of the Shareholders’ General Meeting, the Supervisory Board, and the Executive Board of the Central Depository are defined by this Law, the Law of Ukraine “On Joint-Stock Companies” and the Central Depository’s statute.

The Central Depository’s Rules as well as changes to the Rules are approved by the Central Depository’s Supervisory Board and shall be registered with the Commission according to the established procedure.

Internal documents related to relationship between the Central Depository and its clients are submitted to the Commission on its demand. The Commission has the right to oblige the Central Depository to introduce amendments or cancel certain internal documents.

3. Representatives of self-regulating organizations of professional stock market participants, representatives of the Settlement Center, clearing institutions, and stock exchanges can be invited to the meetings of the Central Depository’s Supervisory Board and the Shareholders’ General Meetings with a right of advisory voting.

Article 13. The National Bank of Ukraine as a participant of the depository system of Ukraine

1. Exclusive terms of reference of the National Bank of Ukraine include performing depository record-keeping of government securities and municipal bonds. Peculiarities of performing depository and clearing activities by the National Bank of Ukraine with government securities and municipal bonds are defined by the Commission upon the approval of the National Bank of Ukraine.

2. In order to provide depository record-keeping of domestic government bonds of Ukraine, targeted domestic government bonds of Ukraine, treasury bills of Ukraine, and domestic municipal bonds the National Bank of Ukraine performs the following functions:

1) crediting securities to the depository record-keeping system, their accounting and safekeeping as well as debiting as a result of securities redemption and/or cancelation;

2) keeping records of issuer’s obligations arising from own issues’ securities with regard to each securities issue on the basis of depositing a global certificate and/or a temporary global certificate;

3) safekeeping of global certificates and/or temporary global certificates;

4) drawing up registers of registered securities owners;

5) storing information on entities, selected to provide an issuer with a register of registered securities owners;

6) receiving income and other proceeds with regard to issuers’ transactions with securities (including those that are placed and circulate outside Ukraine) on the account of the National Bank of Ukraine for their further transfer to recipients;

7) opening and holding securities accounts for issuers, depository institutions, correspondent depositories, clearing institutions and the Settlement Center.

3. To provide performance of activity, stipulated by the Law of Ukraine “On the National Bank of Ukraine”, the Central Depository opens a securities account for the National Bank of Ukraine. Peculiarities of this account’s functioning and execution of transactions on it is defined by the Commission upon the approval of the National Bank of Ukraine.

4. The National Bank of Ukraine submits information on its depository activity to the Commission within the terms and according to a procedure agreed between the National Bank of Ukraine and the Commission.

Article 14. Depository institutions

1. A depository institution is a legal entity which has been established and which is functioning in the form of a joint-stock company or a limited liability company and which has obtained a license on performing depository activity of a depository institution according to the established procedure.

Depository activity of a depository institution is an exclusive type of activity except its combination with other types of activity in a case, stipulated by article 3 of this Law.

On the basis of an agreement on registered securities owners’ register provision a depository institution has a right to render services to securities issuers according to this Law and the Law of Ukraine “On Joint-Stock Companies”.

A depository institution has a right to provide an issuer with value-added services upon holding a joint-stock company’s general meetings (ordinary and extraordinary), including functions of a registration or a calculating commission, preparation and provision reference-analytical materials describing a securities market to an issuer, advisory services on securities accounting and/or circulation as well as services with regard to the management of its account with the Central Depository or other services with regard to the issuer’s securities that are not prohibited by legislation.

A depository institution has a right to provide a depositor with value-added services including those related to implementation of securities entitlements.

2. In order to obtain a license on performing depository activity of a depository institution a legal entity shall have a paid-up share capital in the minimum amount of at least UAH 7 million.

A stake of another depository institution, a securities trader or an institutional investor in the share capital of a depository institution shall not exceed 5 percent.

Requirements regarding a minimum size of depository institution’s regulatory capital as well as other restrictions of a depository institution’s activity are defined by the Commission; the Commission upon the approval of the National Bank of Ukraine sets requirements towards a depository institution which is a bank.

3. In order to perform depository activity a depository institution shall have appropriate equipment, including computer equipment with relevant software, certain communication channels, premises that comply with requirements defined by the Commission.

4. Within a month from the day of obtaining a license on performing depository activity a depository institution shall open an account with the Central Depository. Non-opening of such a securities account is a ground for a license cancellation.

5. The Commission can set additional requirements for depository institutions with the aim of limiting risks of professional activity in the stock market.

6. Depository activity is performed by a depository institution on the basis of a license granted by the Commission according to a procedure defined by legislation.

A self-regulating organization comprising depository institutions has a right to receive reports compiled by such depository institutions according to a procedure defined by the Commission with the aim of their control, generalization, analysis and submission to the Commission.

7. Removal (seizure) of material data carriers related to depository institutions’ performance of securities depository record-keeping and transactions is prohibited.

Article 15. The Settlement Center servicing transactions in financial markets

1. The Settlement Center provides cash settlements of DVP securities transactions, executed on stock exchanges and OTC.

Only one Settlement Center can exist in Ukraine.

The words “Settlement Center servicing transactions in financial markets” and originating from them can legally be used only by a legal entity, which has obtained a relevant status.

2. The Settlement Center is a legal entity, functioning in the form of a public joint-stock company according to the Law of Ukraine “On Joint-Stock Companies” considering peculiarities, defined by legislation. A joint-stock company obtains a status of the Settlement Center on the day of the Settlement Center’s Rules registration with the National Bank of Ukraine according to the established procedure.

3. Shareholders of the Settlement Center can be the National Bank of Ukraine, professional stock market participants, and international depository and clearing institutions.

The Settlement Center’s share capital shall exceed UAH 100 million.

A stake of the National Bank of Ukraine in the Settlement Center’s share capital shall be more than 25 percent plus one share.

4. In order to receive a status of the Settlement Center a legal entity shall have appropriate equipment, including computer equipment with relevant software, certain communication channels, premises that comply with requirements defined by the National Bank of Ukraine.

The Settlement Center’s software and hardware shall correspond to the nature and volume of transactions performed as well as guarantee its smooth functioning.

5. Within exclusive terms of reference of the Settlement Center falls cash settlements of DVP transactions with securities and other financial instruments executed on stock exchanges and OTC.

The Settlement Center opens and maintains cash accounts for stock market participants.

The Settlement Center provides payment of proceeds for securities, nominal value upon securities redemption and upon issuer’s other corporate events including for those securities that are placed and circulate outside Ukraine.

6. The Settlement Center can exercise professional stock market activity — clearing activity according to a procedure established by legislation.

7. The National Bank of Ukraine can support liquidity of the Settlement Center according to a procedure defined by the National Bank of Ukraine.

8. In order to provide settlements the Settlement Center obtains a license for performing certain banking transactions and a general currency license according to a procedure defined by the National Bank of Ukraine.

The Settlement Center performs functions of a currency control agent according to Ukrainian legislation.

9. The National Bank of Ukraine grants the Settlement Center with a status of a participant of the system of electronic payments of the National Bank of Ukraine. Other legal entities operating in

the stock market (except banks) cannot become participants of the system of electronic payments of the National Bank of Ukraine.

10. In order to perform settlement transactions the Settlement Center opens an account with the National Bank of Ukraine as well as opens and maintains accounts for clients in order to settle transactions with securities and other financial instruments.

11. Residents of Ukraine (legal entities, their separated units, physical persons) and non-residents of Ukraine (legal entities, representative offices of legal entities in Ukraine, and physical persons) can be clients of the Settlement Center.

12. Operating mode of the Settlement Center’s clients’ accounts is defined by the Settlement Center itself upon the approval of the National Bank of Ukraine. Terms of an account opening and peculiarities of its functioning are envisaged in an agreement concluded between the Settlement Center and a client-an account owner.

Section III ACTIVITY WITHIN DEPOSITORY SYSTEM OF UKRAINE

Article 16. Depository activity of the Central Depository

1. According to a procedure established by the Commission, in regard to received depository assets the Central Depository keeps depository records and services circulation of securities placed in Ukraine and abroad as well as issuer’s corporate actions on clients’ securities accounts in keeping with the terms of reference related to securities record-keeping covered by this Law.

The Central Depository’s clients are issuers, the National Bank of Ukraine, depository institutions, correspondent depositories, clearing institutions, and the Settlement Center.

The Central Depository’s depository assets are global securities certificates and temporary global securities certificates, certificates of immobilized bearer securities as well as entries on the Central Depository’s securities accounts with foreign depositories, and international depository and clearing institutions.

The Central Depository’s depository assets shall not be subject to a lien to cover the Central Depository’s own obligations as an economic agent.

The Central Depository can settle securities transactions in keeping with a procedure established by article 20 of this Law.

2. The Central Depository can not dispose of securities accounted by it, or take any other actions in regard to such securities except for the actions that have to be taken according to the concluded agreements (in keeping with article 5 of this Law).

Entering into agreements stipulated by article 5 of this Law does not result in transfer of rights in securities and securities entitlements to the Central Depository.

3. The Central Depository provides a consistent backup copying and storage of a depository record-keeping system in keeping with a procedure and terms defined by the Commission.

Article 17. Depository activity of the National Bank of Ukraine

1. According to a procedure established by the National Bank of Ukraine upon the Commission’s approval, in regard to received depository assets the National Bank of Ukraine keeps depository records and services circulation of domestic and foreign government bonds of Ukraine, targeted domestic government bonds of Ukraine, treasury bills of Ukraine, domestic municipal bonds, and debt securities placed abroad that certify nature of self-regulating municipal bodies’ loan, and issuer’s corporate actions on clients’ securities accounts.

Clients of the National Bank of Ukraine are issuers, depository institutions, correspondent depositories, clearing institutions, and the Settlement Center.

Depository assets of the National Bank of Ukraine are global and temporary certificates of securities (records of which are kept by the National Bank of Ukraine according to the terms of reference covered by this Law), as well as entries on securities accounts of the National Bank of Ukraine with foreign depositories, international depository and clearing institutions, and the Central Depository.

Depository assets of the National Bank of Ukraine shall not be subject to a lien to cover own obligations of the National Bank of Ukraine as an economic agent.

The National Bank of Ukraine can settle securities transactions in keeping with a procedure established by article 20 of this Law.

2. The National Bank of Ukraine cannot dispose of securities, records of which are kept by the National Bank of Ukraine according to the terms of reference covered by this Law, or take any other actions in regard to such securities except for the actions that have to be taken according to the concluded agreements (according to article 5 of this Law).

Entering into agreements stipulated by article 5 of this Law does not result in transfer of rights in securities and securities entitlements to the government securities depository of the National Bank of Ukraine.

3. The National Bank of Ukraine provides a consistent backup copying and storage of a depository record-keeping system in keeping with a procedure and terms defined by the National Bank of Ukraine upon the Commission’s approval.

Article 18. Depository activity of a depository institution

1. According to a procedure established by the Commission, in regard to depository assets received from the Central Depository and/or the National Bank of Ukraine, a depository institution keeps depository records, services securities circulation and issuer’s corporate actions on depositors’ securities accounts as well as on its own securities account, on which securities, rights in securities and limitation of rights in securities owned by such a depository institution are accounted.

2. Depository assets of a depository institution are securities credited to such a depository institution’s securities account by the Central Depository and/or the National Bank of Ukraine.

Depository assets of a depository institution shall not be subject to a lien to cover a depository institution’s own obligations as an economic agent.

A depository institution shall provide maintenance of a depository balance.

3. A depository institution can not dispose of depositor’s securities or take any other actions in regard to securities except for the actions that have to be taken upon depositor’s instructions in cases stipulated by an agreement on securities account opening.

Entering into an agreement on servicing depositor’s securities account does not result in transfer of rights in securities and securities entitlements to a depository institution.

Article 19. Activities related to safe-keeping of mutual and pension funds assets

1. Activities related to safe-keeping of mutual and pension funds assets are exercised by a depository institution in keeping with a procedure and in cases defined by the law.

2. The Commission defines a procedure and peculiarities of a depository institution’s control over compliance of operations related to mutual fund assets with regulations, mutual fund’s securities issue prospectus, corporate investment fund’s statute, and legislation; and over compliance of calculation of mutual fund’s net assets value, placement and buy-back of mutual fund’s securities, usage of proceeds received from mutual fund assets by an asset management company with legislation, mutual fund regulations, and a corporate investment fund’s statute.

3. Activity related to safe-keeping of pension funds assets of the corporate non-state pension fund founded by the National Bank of Ukraine is exercised by the National Bank of Ukraine in keeping with a procedure established by legislation.

Article 20. Settlement of securities transactions

1. DVP transactions (executed on a stock exchange or OTC) with securities, records of which are kept by the Central Depository or the National Bank of Ukraine according to the terms of reference covered by this Law, are settled by the means as follows:

a cash transfer by the Settlement Center in keeping with a procedure defined by the National Bank of Ukraine upon the Commission’s approval;

a securities transfer by the Central Depository or the National Bank of Ukraine to clients’ accounts in keeping with a procedure defined by the Commission;

a transfer/debiting/crediting of rights in securities by depository institutions from/to depositors’ accounts in keeping with a procedure defined by the Commission;

a transfer/debiting/crediting of rights in securities by correspondent depositories from/to their clients’ (depositors’) accounts in keeping with legislation of another country.

Exceptional list of grounds for non-transference of securities and/or rights in securities is defined by the Commission. Exceptional list of grounds for non-transference of cash is defined by the National Bank of Ukraine upon the Commission’s approval.

Settlement of DVP transactions (executed on a stock exchange or OTC) with securities, records of which are kept by the Central Depository according to the terms of reference covered by this Law, is considered to have been accomplished only if the following conditions had been met:

- the Central Depository submits information resulting from securities transactions settlement to depository institutions;

- on the grounds of the received information depository institutions transfer rights in securities on depositors’ securities accounts;

- the Central Depository receives information from depository institutions on completed transference.

In keeping with a procedure and terms defined by the Commission, the Central Depository informs the Settlement Center and/or a clearing institution on accomplished settlement of transactions with securities, records of which are kept by the Central Depository according to the terms of reference covered by this Law.

Settlement peculiarities of DVP transactions (executed on a stock exchange or OTC) with securities, records of which are kept by the National Bank of Ukraine according to the terms of reference covered by this Law, are defined by the National Bank of Ukraine upon the Commission’s approval.

DVP securities transactions executed on a stock exchange shall be settled not later than on the third business day from the day, on which a corresponding transaction has taken place, except for cases established by the Commission.

2. To provide accomplishment of transactions (executed on a stock exchange) with securities, records of which are kept by the Central Depository according to the terms of reference covered by this Law, within three months from the moment a corresponding offer has been received, the Central Depository shall conclude an agreement on securities settlement resulting from clearing with clearing institutions and/or the Settlement Center.

Requirements towards the aforementioned agreement are set by the Commission.

3. To provide accomplishment of DVP transactions (executed on a stock exchange and OTC) with securities, records of which are kept by the National Bank of Ukraine according to the terms of reference covered by this Law, within three months from the moment a corresponding offer has been received, the National Bank of Ukraine shall conclude an agreement on securities settlement resulting from clearing with the Settlement Center.

4. The Settlement Center together with the Central Depository or the National Bank of Ukraine implement the ‘delivery versus payment’ principle and guarantee settlement accomplishment in regards to DVP securities transactions executed on a stock exchange and OTC.

5. On the grounds of an agreement concluded with an issuer, in keeping with the terms of reference covered by this Law as to securities record-keeping, the Central Depository can provide for issuer’s redemption of debt securities as well as payment of proceeds for securities by means of cash crediting; the cash had been transferred by an issuer to a cash account opened by the Central Depository with the Settlement Center to be further transferred from this account to recipients’ accounts. Such cash is not property or income of the Central Depository, the Settlement Center, and correspondent depositories.

In keeping with the terms of reference covered by this Law regarding securities record-keeping, the Central Depository provides for issuer’s redemption of debt securities circulating abroad as well as payment of proceeds for securities by means of cash crediting; the cash had been transferred from the Central Depository’s accounts with foreign depository institutions to a cash account opened by the Central Depository with the Settlement Center to be further transferred from this account to recipients’ accounts. Such cash is not property or income of the Central Depository, the Settlement Center, and correspondent depositories.

Crediting of cash received from issuers in regard to securities according to the terms of reference covered by this Law is done in keeping with a procedure and terms defined by the Commission.

6. Securities transactions executed on OTC can be settled in keeping with either a DVP or a FOP principle.

FOP securities transactions executed on OTC are settled in keeping with a procedure stipulated by a relevant agreement according to legislation.

A specific procedure and terms of settlement of securities transactions executed on OTC are defined by such transaction’s terms.

7. A procedure of securities transfer upon securities transactions settlement is defined by the Commission, a procedure of cash transfer – by the National Bank of Ukraine upon the Commission’s approval.

8. Accounts of the Settlement Center and clearing institutions as well as accounts opened with the Clearing Center or clearing institutions to settle/provide for settlement of securities transactions shall not be subject to a lien.

Article 21. Interaction of participants of the depository system of Ukraine

upon securities issuance

1. In keeping with a procedure and terms defined by the Commission, a securities issuer shall submit to the Central Depository or the National Bank of Ukraine (according to the terms of reference covered by this Law as to securities record-keeping) a temporary global certificate, securities issue prospectus, and information on an entity appointed to provide an issuer with a register of registered securities owners (hereinafter referred to as a selected entity), which has been chosen according to article 22 of this Law.

Upon additional shares issuance, information on a selected entity, mentioned in part one of this article is not submitted.

2. Upon securities issuance, within one business day from the date of depositing a temporary global certificate as well as information mentioned in part one of this article, the Central Depository or the National Bank of Ukraine credits all securities of this issue to an issuer’s securities account.

3. If a securities issuer or an underwriter instructs to transfer placed securities from an issuer’s account to an account of a depository institution, with which a depositor’s–first owner’s account is opened, and such a depository institution instructs to transfer the relevant number of securities to its account, the Central Depository or the National Bank of Ukraine performs a transfer within one business day.

Herewith, provided that a depositor–first owner has instructed to credit its account with the relevant number of rights in securities and has submitted documents certifying first owner’s purchase of the relevant number of securities from the issuer, within one business day a depository institution, with which a depositor’s–first owner’s account is opened, submits an instruction to the Central Depository or the National Bank of Ukraine.

4. Within one business day from the moment the relevant number of securities has been transferred from the Central Depository or the National Bank of Ukraine to a depository institution’s securities account (with a subsequent limitation of the mentioned securities’ circulation until the Central Depository or the National Bank of Ukraine has received a global certificate drawn up as a result of a securities placement report registration), such institution credits rights in the relevant number of securities to a depositor’s – first owner’s securities account.

Having received from the Central Depository or the National Bank of Ukraine information on release of limitations of the relevant issue’s securities circulation, a depository institution releases limitations to circulate securities, rights in which are accounted on depositors’-first owners’ accounts.

5. By the time securities have been issued and a report on securities placement results has been registered with the Commission, the Commission defines peculiarities of securities record-keeping, including the case of their placement on a stock exchange.

6. Upon securities placement on a stock exchange, a stock exchange submits information on depositors – first owners to the Central Depository or the National Bank of Ukraine in keeping with a procedure defined by the Commission.

If information submitted by a stock exchange to the Central Depository or the National Bank of Ukraine contains data on transactions that had been executed on a stock exchange in regard to ownership transfer of first owners’ securities (which circulation is limited until a global certificate drawn up as a result of securities placement report registration has been submitted to the Central Depository or the National Bank of Ukraine), the Central Depository or the National Bank of Ukraine does not introduce any changes into the depository record-keeping system on the grounds of such information and returns received information back to a stock exchange for violations elimination as well as informs the Commission on such an action.

A stock exchange is liable for completeness and faithfulness of information submitted to the Central Depository or the National Bank of Ukraine in keeping with a procedure established by law.

7. Peculiarities of drawing-up and depositing a global certificate and a temporary global certificate of mutual funds’ securities issues as well as their record-keeping are defined by the Commission.

8. A procedure of interaction of depository system’s participants regarding issuance of securities, depository records of which are kept by the National Bank of Ukraine according to this Law, is defined by the National Bank of Ukraine according to legislation.

Article 22. Drawing up a register of registered securities owners

1. In cases established by legislation, eligible securities entitlements are exercised on the grounds of a register of registered securities owners.

2. A register of registered securities owners is drawn up by the Central Depository; in cases established by this Law – by the National Bank of Ukraine.

3. A procedure of drawing up a register of registered securities owners, including a procedure of depository institutions’ interaction with the Central Depository or the National Bank of Ukraine

upon a register’s drawing up is established by this Law as well as legal and regulatory acts of the Commission and the National Bank of Ukraine.

4. A registered securities issuer shall conclude an agreement on registered securities owners’ register provision (hereinafter referred to as an agreement on a register provision) with a selected entity.

An issuer may not conclude an agreement on a register provision with the Central Depository or the National Bank of Ukraine if a selected entity is the Central Depository or the National Bank of Ukraine and a procedure as well as terms of a register provision are stipulated by an agreement on securities issues servicing.

Requirements towards an agreement on a register provision are approved by the Commission.

5. A register of registered securities owners is drawn up upon receipt of an issuer’s instruction, and in other cases defined by the Commission.

An issuer or another entity having a right to receive a register of registered securities owners instructs a selected entity to provide a register of registered securities owners and specifies a date as of which a register shall be drawn up (hereinafter referred to as a record date) in cases defined by the Commission.

Upon a shareholders’ general meeting a register of registered securities owners is drawn up as of 24 hour three business days prior to the meeting day in keeping with a procedure defined by the Commission.

6. If a depository institution is a selected entity, upon receipt of an instruction to provide a register of registered securities owners, it instructs the Central Depository to draw up a register of registered securities owners of a corresponding issuer.

The Central Depository draws up a register of owners of registered securities (records of which are kept by the Central Depository in keeping with the terms of reference covered by this Law), and submits it to a depository institution, with which an issuer has concluded an agreement on a register provision. Having received a register of registered securities owners, according to an agreement a depository institution provides an issuer with a register of registered securities owners in keeping with a procedure established by the agreement and according to requirements defined by the Commission.

If a register of registered securities owners is submitted in a paper form, it is certified with a stamp and signature of a depository institution’s authorized person.

A depository institution has no right to introduce changes into a register of owners of registered securities (records of which are kept by the Central Depository in keeping with the terms of reference covered by this Law) drawn up by the Central Depository.

7. If the Central Depository (in cases defined by this Law – the National Bank of Ukraine) is a selected entity, which has been instructed to provide a register of registered securities owners, it draws up a register and submits it to the issuer in keeping with a procedure established by the agreement and according to requirements defined by the Commission.

If a register of registered securities owners is submitted in a paper form, it is certified with a stamp and signature of an authorized person of the Central Depository (in cases defined by this Law – of the National Bank of Ukraine).

8. If a register of registered securities owners is submitted by the Central Depository (in cases defined by this Law – by the National Bank of Ukraine) to the issuer in an electronic form, a paper form of a register is certified with a stamp and signature of the issuer’s authorized person.

9. The Central Depository (in cases defined by this Law – the National Bank of Ukraine) draws up a register of registered securities owners on the grounds of information received from depository institutions, the National Bank of Ukraine, and correspondent depositories; the information is prepared according to entries on their depositors’ (clients’) securities accounts as of 24 hour of the record day in keeping with a procedure defined by the Commission, and entries on securities accounts of an issuer, a clearing institution, and the Settlement Center as of 24 hour of the record day in keeping with a procedure defined by the Commission.

10. A procedure of a selected entity replacement is established by the Central Depository’s Rules and in cases defined by this Law – by the National Bank of Ukraine.

Powers are deemed to have been delegated from one selected entity to another on the day such information is submitted to the Central Depository and in cases defined by this Law – to the National Bank of Ukraine.

Upon the Commission’s written request, the Central Depository submits summarized information on selected entities.

11. The National Bank of Ukraine can establish a separate procedure of drawing up and submitting a register of owners of registered securities, depository records of which are kept by the National Bank of Ukraine according to this Law.

12. The Central Depository and the National Bank of Ukraine take measures to prevent disclosure of information contained in registers of registered securities owners. Persons guilty of the mentioned information disclosure shall be liable according to legislation.

Article 23. Crediting a notary’s deposit with securities

1. In cases stipulated by legislation, to fulfill its obligations to a creditor, a debtor can credit a notary’s deposit with securities.

If a notary’s deposit is credited with securities, a creditor acquires rights in securities and securities entitlements under obligations. In keeping with a procedure established by legislation, a notary shall inform a creditor on crediting a notary’s deposit with securities.

Securities credited to a notary’s deposit can be encumbered in cases stipulated by legislation.

2. Book-entry (electronic) securities are inputted into a notary’s deposit by means of crediting securities of a creditor on a separate account marked as ‘notary’s deposit’ opened by a notary with a depository institution.

3. Securities credited to a notary’s deposit are not counted upon voting and quorum at the shareholders’ (participants’) general meeting of such a securities issuer. Proceeds and other

income from securities credited to a notary’s deposit are transferred to a notary and are in a creditor’s ownership.

Section IV DISCLOSURE AND PROTECTION OF INFORMATION CONTAINED

WITHIN THE DEPOSITORY RECORD-KEEPING SYSTEM

Article 24. Information contained within the depository record-keeping system

1. Information contained within the depository record-keeping system is information with limited access, which is protected by law and is not subject to disclosure apart from the cases envisaged by article 25 of this Law.

2. An owner of information contained within the depository record-keeping system are the following entities:

a depository institution’s depositor — with regard to information contained on its account opened with a depository institution;

an issuer — with regard to information contained on its securities account opened with the Central Depository or the National Bank of Ukraine as well as with regard to information from such issuer’s registered securities owners’ register;

a depository institution — with regard to information contained on its account opened with the Central Depository and/or the National Bank of Ukraine;

a correspondent depository — with regard to information contained on its account opened with the Central Depository;

the Central Depository — with regard to information contained on its account opened with a foreign depository or an international depository and clearing institution, which is a non-resident of Ukraine;

the National Bank of Ukraine — with regard to information contained on its account opened with the Central Depository as well as on its account opened with a foreign depository or an international depository and clearing institution, which is a non-resident of Ukraine;

clearing institutions and the Settlement Center — with regard to information contained on their accounts opened with the Central Depository and/or the National Bank of Ukraine.

3. Information contained within the depository record-keeping system is provided to the information owner or its representative according to the terms of an agreement or to other entities in cases stipulated by law.

Article 25. Access to information contained within the depository record-keeping system

1. Information contained within the depository record-keeping system is provided by depository institutions on a written request of:

1) a court;

2) public prosecution bodies of Ukraine; the Security Service of Ukraine; the Ministry of Internal Affairs of Ukraine, tax police — with regard to executed transactions on accounts of a certain legal or physical entity over a certain period exclusively within criminal and investigative measures;

3) bodies of the Antimonopoly Committee of Ukraine — with regard to data on securities owners, transactions on securities owners’ accounts as well as securities issuers’ accounts upon consideration of applications and cases on violation of law on economic competition protection and in other cases stipulated by law;

4) bodies of the State Tax Service of Ukraine — with regard to imposing taxes on transactions executed on a certain legal or physical entity’s accounts over a certain period;

5) a special government authority on financial monitoring — with regard to additional data on a financial transaction, which has become subject to financial monitoring;

6) bodies of the State Executive Service of Ukraine — upon enforcement proceeding with regard to a balance of a certain legal or physical entity’s securities account and transactions on the securities account over a certain period of time;

7) the Commission — with regard to data on securities owners, their accounts as well as corresponding transactions with these owners’ securities;

8) the National Bank of Ukraine — with regard to data on owners of securities issued by banks as well as according to the Law of Ukraine “On the National Bank of Ukraine” — with regard to data on government securities;

9) the National Commission on State Regulation in the Sphere of Financial Services Markets within the terms of its reference according to the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets” — with regard to data on owners of securities issued by respective financial institutions;

10) notary offices (notaries) or diplomatic representations and consular offices of Ukraine in foreign countries — with regard to data on decedent owners’ securities accounts.

2. A written request of the entities indicated in items 2-10, part one of this article, related to submission of information on legal and physical entities:

1) shall be drawn up on a due letterhead of this entity;

2) shall be signed by a director (deputy director) of this entity or its local agency sealed with a stamp;

3) shall contain grounds for obtaining information stipulated by this Law as well as references to legislative provisions, according to which the entity or its local agency has the right for its receipt.

3. A depository institution can not submit any information about other depository institution’s depositors apart from provision of a registered securities owners’ register according to article 22 of this Law and in other cases envisaged by law.

4. A procedure and terms of depository institutions’ information submission stipulated by part one of this article, are set by the Commission considering requirements of the law.

5. The Central Depository and the National Bank of Ukraine shall disclose information contained in the depository record-keeping system with regard to the number of a certain issuer’s securities of a certain issue on a certain client’s account with the Central depository or the National Bank of Ukraine as of a certain date, with regard to transactions with a certain issuer’s securities of a certain issue on clients’ accounts with the Central Depository or the National Bank of Ukraine over a certain period, and with regard to a list of the Central Depository’s or the National Bank’s of Ukraine clients, on which accounts a certain issuer’s securities of a certain issue were held as of a certain date, in the following cases:

1) by decision of a court;

2) upon written request of a state authority received with consideration of requirements of part two of this article within the terms of its reference and on the grounds of the law.

6. Entities violating a procedure of disclosure and usage of information contained in the depository record-keeping system bear responsibility according to the law.

7. According to a procedure set by the Central Depository’s Supervisory Board, the Central Depository discloses information on securities codes (ISINs) register on its web site in the Internet.

The information for disclosure shall include:

1) assigned securities codes (ISINs);

2) securities issuers’ SSREOU (Single state register of enterprises and organizations of Ukraine) codes;

3) securities issuers’ names;

4) securities entitlements defined by an issuer upon depositing a global (temporary global) certificate;

5) other information defined by the Commission.

Article 26. Non-disclosure of information contained within the depository record-keeping system by professional participants of the depository system of

Ukraine

1. Professional participants of the depository system of Ukraine provide non-disclosure of information contained within the depository record-keeping system through:

1) limiting the number of persons with access to the mentioned information;

2) organizing a special workflow in the depository record-keeping system;

3) using technical and software means to prevent unauthorized access to such information carriers.

2. During an employment procedure employees of a professional participant of the depository system of Ukraine give a written commitment on non-disclosure of information contained in the depository record-keeping system.

Article 27. Electronic document flow and storage of electronic documents within the depository system of Ukraine

1. In cases stipulated by the Commission, participants of the depository system of Ukraine use electronic document flow and electronic digital signature within the depository system of Ukraine according to legislation.

2. Usage of electronic document flow shall provide protection of information contained in the depository record-keeping system to prevent illegal actions with such information.

3. A procedure of circulation, storage, and deletion of electronic documents used by professional participants of the depository system of Ukraine is defined by the Commission.

Section V

STATE REGULATION, SUPERVISION, AND CONTROL IN THE DEPOSITORY SYSTEM OF UKRAINE

Article 28. State regulation in the depository system of Ukraine

1. State regulation in the depository system of Ukraine is performed by the Commission as well as the National Bank of Ukraine and other state authorities within their terms of reference defined by law.

2. The Commission performs state regulation in the depository system according to the Law of Ukraine “On Securities Market State Regulation in Ukraine”, this Law, and other regulatory legal acts.

With the purpose of state regulation of the depository system of Ukraine the Commission:

sets requirements towards activity of participants of the depository system of Ukraine and relationship between them;

defines principles of establishing the depository record-keeping system;

sets requirements towards a procedure of opening and maintaining securities accounts as well as a procedure of executing transactions and types of transactions executed by the Central Depository, the National bank of Ukraine, and depository institutions on securities accounts;

sets a procedure, terms, and forms of reporting on their activity to the Commission for professional participants of the depository system of Ukraine;

sets requirements towards a form, content and a procedure of information disclosure on their activity for professional participants of the depository system of Ukraine;

sets requirements towards internal documents of professional participants of the depository system of Ukraine;

sets requirements towards a procedure of crediting securities into the depository record-keeping system upon issuance as well as debiting securities upon redemption and/or cancelation.

adopts other legal and regulatory acts within its terms of reference.

Article 29. Licensing of professional participants of the depository system of Ukraine

1. According to a defined procedure the Commission issues a certain license for performing each type of depository activity apart from depository activity of the Central Depository and the National Bank of Ukraine.

2. If the National Bank of Ukraine exercises depository activity of a depository institution, such activity is exercised according to a procedure defined by the Commission upon approval of the National Bank of Ukraine without a corresponding license.

If the Settlement Center and clearing institutions exercise activity of a depository institution, such activity is exercised according to a procedure defined by the Commission without a corresponding license.

Article 30. Central Depository’s control

1. To provide establishing and functioning of the depository record-keeping system the Central Depository has the following control powers:

1) defining a form, content, terms, and a procedure of submitting information on their activity by depository institutions and other clients to the Central Depository;

2) with regard to depository institutions’ ratio between their depository assets and rights in securities credited on depositors’ securities accounts (depository balance);

3) cessation of depository institution’s transactions with securities of a certain issue, for which a depository imbalance within a depository institution has been identified;

4) instructing a depository institution on removing a depository imbalance.

Article 31. Responsibility for violation of this Law’s requirements

1. Entities guilty of this Law’s requirements violation bear responsibility according to the law.

Section VI FINAL AND TRANSITIONAL PROVISIONS

1. This Law becomes effective in twelve months from the date of its publication. Section II of this Law, abstracts 2-9 of sub-item 9, abstracts 46-113 of sub-item 16 of item 4 regarding establishment of the Central Depository, the Settlement Center and depository institutions, and items 5-10 of this section come into force on the day of this Law publication. … 3. The Law of Ukraine ‘On National Depository System and Peculiarities of Electronic Circulation of Securities in Ukraine’ expires in six months from the date of coming into force of this Law.

4. Changes shall be introduced into the following Ukrainian laws:

…

3) in the Economic Code of Ukraine:

in article 163:

the second abstract of part one shall be outlined in the following edition:

“A security is a document of a defined form with corresponding credentials certifying a cash or other property right, establishing relationship between a security’s issuer (an entity that has issued a security) and an entity having rights in a security; it assumes fulfillment of obligations arising from such a security as well as the possibility of transference of rights in securities and securities entitlements to other entities”;

…

4) in the Civil Code of Ukraine

in article 194:

the first part shall be outlined in the following edition:

"1. A security is a document of a defined form with corresponding credentials certifying a cash or other property right, establishing relationship between a security’s issuer (an entity that has issued a security) and an entity having rights in a security; it assumes fulfillment of obligations arising from such a security as well as the possibility of transference of rights in securities and securities entitlements to other entities";

article 197 shall be outlined in the following edition:

“Article 197. Rights in securities and securities entitlements

1. An entity obtaining a right in a security simultaneously obtains all the rights certified by a security (security entitlements).

2. According to the issuance form securities can be bearer, registered or order.

Rights in documentary (paper) securities and documentary securities entitlements belong to the following:

1) a bearer of a security (a bearer security);

2) a person indicated in a security (a registered security);

3) a person indicated in a security, which can independently exercise these rights or appoint by its instruction (order) another authorized person (an order security);

…

9) in the Law of Ukraine “On Securities Market State Regulation in Ukraine”

in article 4:

items 7 – 9 and 11 of part one shall be outlined in the following edition:

“7) depository activity of a depository institution — an activity related to depository record-keeping and servicing placement, securities circulation, and issuer’s transactions with regard to securities placed by an issuer on securities accounts of depository institution’s depositors;

8) activity related to safekeeping of collective investment institutions’ assets — an activity related to safekeeping of collective investment institutions’ assets (documents certifying ownership rights for collective investment institutions’ assets), servicing collective investment institutions’ transactions and controlling their activity in cases and according to a procedure defined by the law;

9) activity related to safekeeping of pension funds’ assets — an activity related to servicing a pension fund according to the Law of Ukraine “On Non-State Pension Provision”;

“11) clearing activity — an activity related to defining obligations to be fulfilled upon transactions with securities and other financial instruments, preparation of documents (information) for settlement as well as setting a guarantee system of fulfilling obligations arising from transactions with securities and other financial instruments”;

items 9 and 11 of part two in article 7 shall be outlined in the following edition:

“9) defines a procedure and grants licenses for exercising stock market activity as well as cancels the abovementioned licenses in cases when stock market legislation requirements are violated”;

“11) upon the National Bank’s of Ukraine approval sets peculiarities of granting licenses for exercising stock market activity to banks as well as peculiarities of the National Bank’s of Ukraine stock market activity”; …

10) in the Law of Ukraine “On the National Bank of Ukraine”:

items 221, 222, 25 and 26 shall be added into article 7 with the following content:

“221) exercises powers in the field of depository record-keeping according to the terms of its reference;

222) provides record-keeping and safekeeping of the transferred securities and other valuables, that have been seized (arrested) for the benefit of the state and/or those recognized as having no owner; for these reasons securities accounts with depository institutions can be opened”;

“25) keeps a register of payment systems, settlement systems, participants of these systems, and payment infrastructure service providers;

26) monitors payment and settlement systems”;

the following content shall be added to article 40:

“the National Bank of Ukraine defines a procedure of information exchange and clearing of transactions executed within Ukraine”

in part one of article 42:

item 9 shall be excluded;

items 17-20 shall be added with the following content:

“17) directly cooperates with the Central Securities Depository to provide execution of its securities transactions;

18) establishes direct links with international depositories to perform monetary functions and manage government debt with the purpose of depositing foreign government bonds with international depositories;

19) provides clearing and settlement of transactions in financial markets through participation in establishment of the Settlement Center servicing transactions in financial markets and supervision of its activity, including an opportunity to support its liquidity according to a procedure defined by the National Bank of Ukraine;

20) keeps data base on agreements, concluded in a financial market according to a procedure, defined by the National Bank of Ukraine; … 16) in the Law of Ukraine “On Securities and Stock Market” to amend article 1 by adding the following: “clearing – defining mutual obligations arising from transactions with securities and other financial instruments, also by means of netting; “netting – full or partial termination of obligations arising from transactions with securities and other financial instruments by means of offsetting obligations or by other means. At the moment of netting, a deadline for performance of netted obligations is deemed to be due.

system of risk and guarantees management of an entity exercising clearing activity – actions aimed at reducing risks of non-fulfillment or untimely fulfillment of obligations arising from transactions with financial instruments”; in article 2: to amend abstract 4 part 2 by changing the words “registrars and custodians” into “depository institutions”; to amend the article by adding the fourth part: “4. Unless otherwise stipulated by law or one of the parties to the agreement agree otherwise securities transactions executed OTC do not need to be attested by a notary”; In article 3 to amend parts 1- 4 as follows: “1. A security is a document of a defined form with corresponding credentials certifying a cash or other property right, establishing relationship between a security’s issuer (an entity that has issued a security) and an entity having rights in a security; it assumes fulfillment of obligations arising from such a security as well as the possibility of transference of rights in securities and securities entitlements to other entities. 2. Non-eligible (non-issuable) securities can exist only in documentary (paper) form and according to the form of issue securities may be only order or bearer. 3. By the form of existence securities fall into book-entry (electronic) securities and documentary (paper) securities. A book-entry (electronic) security is a register entry on a securities account within the depository securities record-keeping system. A documentary (paper) security is a security’s certificate – a pre-printed form of a security indicating a security’s kind and containing essentials defined by legislation. 4. According to the form of issue securities may be bearer, registered or order. Rights in documentary securities and documentary securities entitlements belong to the following: a bearer of a security (a bearer security); a person indicated in a security (a registered security); or a person indicated in a security, that can independently exercise these rights or appoint by its instruction (order) another authorized person (an order security). Order securities can only exist in a documentary (paper) form. Rights in book-entry securities and book-entry securities entitlements belong to an owner of a securities account opened with a depository institution, in case securities have been credited to a notary’s deposit – to a corresponding creditor.

Bearer securities issuer has no right to receive information from the depository securities record-keeping system on owners of such securities in any form, except for cases defined by the National Securities and Stock Market Commission. Registered securities issuer has a right to receive information from the depository securities record-keeping system on owners of such securities in a form of a registered securities owners’ register. Eligible registered securities can only exist in a book-entry (electronic) form. Eligible bearer securities can be transferred into a book-entry (electronic) form by means of depositing such securities on securities accounts with the Central Securities Depository or the National Bank of Ukraine according to the terms of reference covered by the Law of Ukraine “On Depository System of Ukraine” (immobilized) according to a procedure defined by the National Securities and Stock Market Commission. Eligible bearer securities that exist in a book-entry (electronic) form can not be transferred into a documentary (paper) form”; article 4 shall be amended as follows:

“Article 4. Transference of rights in securities and securities entitlements

1. An entity obtaining a right in a security simultaneously obtains all the rights certified by a security (security entitlements) apart from cases defined by law or a legal act.

Limitations of rights in securities or securities entitlements can be imposed only in cases and according to a procedure stipulated by law.

2. Rights in documentary bearer securities or documentary bearer securities entitlements are transferred through disposal of such a security to another person.

Rights in book-entry bearer securities or book-entry bearer securities entitlements are transferred according to a procedure defined for transference of rights in registered securities.

Transference of rights in immobilized bearer securities and their entitlements’ exercise requires obligatory identification of an owner by a depository institution, which holds a securities account of such an owner.

Bearer securities owners’ register is not drawn up.

3. Rights in a registered security and registered security entitlements are transferred to another person according to a procedure stipulated by legislation on the depository system of Ukraine.

An issuer obtains information on registered securities owners in a form of a registered securities owners’ register. Transference of rights in registered securities and their entitlements’ exercise requires obligatory identification of an owner by a depository institution, which holds a securities account of such an owner.

4. An ownership right certified by an order security is transferred to another person via an endorsement. An endorsement can be blank — without indication of a person for the benefit of which obligations have to be fulfilled, or it can be order — with indication of such a person.

5. Peculiarities of transference of rights in securities and securities entitlements are defined by the National Securities and Stock Market Commission and by a certain legal act”:

part three shall be added to article 5 with the following content:

“3. Eligible securities proceeds are paid according to a procedure stipulated by legislation on the depository system of Ukraine”;

in article 16:

in the first abstract of part one the words “keeping records of” shall be followed with the words “rights in securities and”;

to amend part two by adding the following abstract:

“clearing activity”;

in part three:

the first sentence shall be followed with the words: “(apart from professional activity of the Central Securities Depository and depository activity of the National Bank of Ukraine)”;

two abstracts with the following content shall be added:

“Professional activity of the Central Securities Depository is exercised on the grounds of the Central Securities Depository’s Rules, registered with the National Securities and Stock Market Commission according to a procedure stipulated by legislation.

Depository activity of the National Bank of Ukraine is exercised with consideration of peculiarities of depository and clearing activity with securities within the terms of reference defined by the Law of Ukraine “On Depository System of Ukraine”;

to amend by adding the following articles 191 – 197:

“Article 191. Clearing activity

1. Clearing activity – an activity related to defining obligations to be fulfilled upon transactions with securities and other financial instruments, preparation of documents (information) for settlement as well as setting a guarantee system of fulfilling obligations arising from transactions with securities and other financial instruments. 2. Entities engaged in clearing activity are clearing institutions and the Settlement Center servicing transactions on financial markets. The Central Securities Depository and the National Bank of Ukraine can exercise clearing activity considering requirements established by law. 3. Requirements towards a minimum size of a regulatory capital of an entity exercising clearing activity as well as other limitations of its activity are set by the National Securities and Stock Market Commission upon the approval of the National Bank of Ukraine.

Article 192. Establishing a clearing institution

1. A clearing institution is an entity, which has been established and which is functioning as a joint-stock company. An entity acquires a status of a clearing institution at the moment of obtaining a license on clearing activity and a license of the National Bank of Ukraine on performing certain banking operations in keeping with a procedure defined by the National Bank of Ukraine. 2. A clearing institution’s share capital shall be paid-up by cash. 3. In order to exercise clearing activity a clearing institution shall have appropriate equipment, including computer equipment with relevant software, certain communication channels, and premises that comply with requirements defined by the National Securities and Stock Market Commission and the National Bank of Ukraine. 4. During three month from the moment a license on clearing activity has been received a clearing institution shall: 1) conclude an agreement on securities settlement resulting from clearing with the Central Securities Depository or the National Bank of Ukraine according to the terms of reference defined by legislation; 2) agreement on cash settlement resulting from clearing with the Settlement Center servicing transactions on financial markets; 3) agreement on rendering clearing services with at least one stock exchange. Requirements towards the aforementioned agreements are set by the National Securities and Stock Market Commission. By the time the aforementioned agreements have been concluded a clearing institution has no right to exercise clearing activity in regard to securities. 5. The National Securities and Stock Market Commission can set additional requirements towards clearing institutions with the aim of limiting risks of professional activity in the stock market.

6. The words “a clearing institution” and originating from them can be used only by legal entities that have been established ant that are functioning according to this Law’s requirements.

Article 193. Exercising clearing activity 1. The Central Securities Depository, a clearing institution or the Settlement Center servicing transactions on financial markets exercise clearing activity on the grounds on a license issued by the National Securities and Stock Market Commission according to the defined procedure, and can provide certain banking services on the grounds of a license issued by the National Bank of Ukraine. By the time clearing activity has been exercised, according to the defined procedure the Central Securities Depository, a clearing institution or the Settlement Center servicing transactions on financial markets shall register Clearing Activity Rules specifying a general procedure of exercising clearing activity with the National Securities and Stock Market Commission.

Securities transactions executed on a certain stock exchange can be cleared only by one entity that has been granted a license on clearing activity. 2. Clearing activity is an exclusive type of professional activity on the stock market, apart from its combination in cases established by legislation - provided such activities are performed by separate structural units. 3. To exercise clearing activity, in keeping with a procedure and terms defined by the National Securities and Stock Market Commission, a clearing institution, the Central Securities Depository or the Settlement Center servicing transactions on financial markets shall register with the National Securities and Stock Market Commission the following internal documents: 1) clearing rules approved by the National Bank of Ukraine; 2) a document specifying a procedure of organizing and exercising internal audit (control); 3) a document defining a system of risks and guarantees management specifying risks types, a method of their calculation, risk mitigation measures, a procedure and terms of their application. 4. Grounds for refusal to register internal documents of an entity exercising clearing activity and introduce changes into them are as follows: 1) non-compliance of documents submitted for registration with legislative requirements including legal and regulatory acts of the National Securities and Stock Market Commission; 2) lack of documents, submission of documents with incomplete or unfaithful information; 3) non-compliance of share capital’s size with legislative requirements.

Article 194. Clearing rules

Clearing rules shall contain the following: 1) requirements towards clearing participants; 2) a clearing procedure with and/or without participation of a central counterparty; 3) a procedure, terms of obligations’ admission to clearing, and requirements towards such obligations; 4) rights and obligations of an entity exercising clearing activity as well as clearing participants; 5) a procedure of record-keeping rights and obligations arising from transactions with securities and other financial instruments, and their termination; 6) a procedure of submitting reports resulting from clearing and settlement to clearing participants by an entity exercising clearing activity; 7) a procedure of submitting information broken down by clients of the Central Securities Depository and/or the National Bank of Ukraine and their depositors to the Central Securities Depository and the National Bank of Ukraine (according to the terms of reference stipulated by the Law of Ukraine “On Depository System of Ukraine”) by an entity exercising clearing

activity in regard to securities transfer resulting from clearing of obligations arising from DVP securities transactions executed on a stock exchange (following each trading session) and OTC (except for the case, when clearing activity is exercised by the Central Securities Depository or the National Bank of Ukraine). 8) a procedure of submitting information broken down by clients to the Settlement Center servicing transactions on financial markets by an entity exercising clearing activity in regard to cash transfer resulting from clearing of obligations arising from DVP securities transactions executed on a stock exchange (following each trading session) and OTC. 9) a description of measures aimed at mitigating risks of non-fulfillment or improper fulfillment of obligations arising from transactions with securities and other financial instruments on the grounds of one of the risks mitigation mechanisms stipulated by part two of this article; 10) a description of information protection system; 11) other provisions according to this Law and other laws. The National Securities and Stock Market Commission can set additional requirements towards clearing rules. 2. Mechanisms of mitigating risks of non-fulfillment or improper fulfillment of obligations stipulated by transactions executed on a stock exchange are as follows: obligatory total pre-deposit and reservation of cash and securities or other financial instruments in keeping with a procedure defined by the National Securities and Stock Market Commission upon the approval of the National Bank of Ukraine; partial (absent) pre-deposit and reservation of cash and securities or other financial instruments with compulsory setting of risks and guarantees management system (which can envisage setting up a guarantee fund at the expense of contributions made by clearing participants and other participants of the depository system), in keeping with a procedure defined by the National Securities and Stock Market Commission upon the approval of the National Bank of Ukraine. A procedure of setting up and using a guarantee fund in the form of securities and other financial instruments is defined by the Commission, in the form of cash – by the National Bank of Ukraine. 3. Additional requirements towards clearing rules are set by the National Securities and Stock Market Commission upon the approval of the National Bank of Ukraine.

Article 195. Clearing process organization

1. An entity exercising clearing activity clears only those obligations that have been accepted to clearing in keeping with a procedure and terms defined by clearing rules. 2. A procedure of securities transactions clearing as well as a procedure of supervision over clearing activity is set by the National Securities and Stock Market Commission. 3. An invalid transaction, arising obligations from which have been terminated as a result of clearing, does not trigger invalid transactions executed in the process of clearing, and clearing results.

Article 196. Central Counterparty

1. Central counterparty — a legal entity exercising clearing activity, obtaining mutual rights and obligations of counterparties to transactions with securities, obligations upon which have been admitted to clearing, as well as taking a role of a buyer for each seller and a seller for each buyer.

Clearing institutions and the Settlement Center servicing transactions in financial markets are entities performing functions of a central counterparty.

To provide fulfillment of obligations admitted to clearing a central counterparty can participate in exchange trading without a license on exercising stock market activity — securities trading activity.

2. Capital adequacy requirements towards an entity exercising clearing activity and performing functions of a central counterparty are defined by the National Securities and Stock Market Commission.

The words “central counterparty” and originating from them can be used only by legal entities, which have been established and which are functioning according to this Law’s requirements.

3. The National Securities and Stock Market Commission can set additional requirements towards entities exercising clearing activity and performing functions of a central counterparty.

Article 197. Guarantees of non-interference in the activity of an entity exercising clearing activity

1. State authorities and their officials shall not interfere in performing functions and exercising powers by clearing institutions and the Settlement Center servicing transactions in financial markets apart from certain cases defined by the law”;

the words “including clearing and their settlement” shall be excluded from part one of article 20;

part three of the following content shall be added to article 24:

“3. By the time stock exchange rules have been submitted for registration to the National Securities and Stock Market Commission, the stock exchange shall conclude an agreement on clearing and settlement of securities transactions with an entity exercising clearing activity.

Requirements towards the abovementioned agreement are defined by the National Securities and Stock Market Commission.

By the time the abovementioned agreement has been concluded, a stock exchange has no right to exercise activity on organizing stock market securities trading”;

abstracts of the following content shall be added to part one of article 25:

“interaction with an entity exercising clearing activity in regard to clearing of transactions with securities and other financial instruments;

interaction with the Central Securities Depository in regard to exchange of information on securities transactions executed on a stock exchange (within the terms of reference stipulated by the law) following each trading session on an exchange;

interaction with the National Bank of Ukraine in regard to exchange of information on securities transactions executed on a stock exchange (within the terms of reference stipulated by the law) following each trading session on an exchange;

in article 26:

parts three and four shall be excluded;

the words “apart from activity on keeping registers of registered securities owners of collective investment institutions in cases stipulated by law” shall be excluded;

in item 7 of part one and in item 6 of part two in article 28 the words “or with a registrar — on keeping a register of registered securities owners apart from cases when the records of securities entitlements are kept by an issuer according to legislation or when bearer securities are placed” shall be excluded;

article 42 shall be outlined in the following edition:

“Article 42. Disclosure of information contained within the securities depository record-keeping system

1. Information contained within the securities depository record-keeping system shall be disclosed in cases and according to a procedure stipulated by the Law of Ukraine “On Depository System of Ukraine”;

17) in the Law of Ukraine “On Joint-Stock Companies”:

part five of article 30 shall be outlined in the following edition:

“5. To provide payment of dividends a company according to a procedure, defined by legislation on the depository system of Ukraine, shall transfer dividends to the Central Securities Depository’s account opened with the Settlement Center servicing transactions in financial markets to be credited to depository institutions’ and correspondent depositories’ accounts; depository institutions shall further transfer dividends to depositors’ accounts or provide payment to depositors by another way stipulated by an agreement; correspondent depositories shall further transfer dividends to the entities having rights for receiving income and other proceeds according to legislation of a foreign country”;

part 2 of article 35 shall be excluded;

…

5. Within six months since this Law has been published the National Securities and Stock Market Commission shall develop and approve the following:

1) a procedure of securities transference for depository servicing to the Central Securities Depository;

2) a procedure and terms of granting a license for exercising depository activity of a depository institution, license reissuance, issuance of its duplicate and copy;

3) a procedure and terms of granting a license for exercising clearing activity, license reissuance, issuance of its duplicate and copy;

4) a procedure of submitting information contained in the system of registered securities owners’ register to the depository record-keeping system;

5) a procedure of registering securities issues, which had not been registered before this Law came into force as well as a procedure of such securities issues’ transference into the depository record-keeping system;

6) a procedure of exercising depository activity by the Central Securities Depository and depository institutions;

7) a procedure of exercising clearing activity;

8) licensing terms of exercising professional stock market activity — depository activity of depository institutions and clearing activity;

Within six months since this Law has been published the National Bank of Ukraine together with the National Securities and Stock Market Commission shall develop and approve regulatory and legal acts to provide functioning of the Settlement Center servicing transactions in financial markets.

6. Licenses for exercising depository activity of a securities depository, depository activity of a securities custodian, activity of keeping register of registered securities owners, and settlement and clearing activity, issued by the National Securities and Stock Market Commission before publication of this Law, are valid till this Law comes into force.

When this Law comes into force the National Securities and Stock Market Commission shall provide cancelation of licenses for exercising depository activity of a securities depository, depository activity of a securities custodian, activity of keeping register of registered securities owners, and settlement and clearing activity.

Upon this Law publication the National Securities and Stock Market Commission obtains a right to issue licenses for exercising depository activity of a depository institution, activity of safekeeping collective investment institutions’ assets, activity of safekeeping pension funds’ assets, and clearing activity; the licenses become valid when this Law comes into force.

7. Registrars and custodians having licenses for exercising a corresponding type of activity shall bring its activity in compliance with this Law’s requirements before this Law comes into force and submit to the National Securities and Stock Market Commission required documents for new licenses issuance or terminate its activity according to a procedure defined by the Commission.

Changes to foundation documents of legal entities which had licenses for exercising certain types of depository activity before this Law publication as well as new licenses issuance to such legal entities in view of this Law adoption is registered with the State free of charge.

8. A decision on transference of securities (which according to this Law fall within the terms of reference of the National Bank of Ukraine) for depository servicing to the Central Securities

Depository can be taken not earlier than two years after this Law comes into force; in view of this fact functions of a depository of such securities is transferred to the Central Securities Depository.

A procedure of the abovementioned transference and a system of information exchange between the National Bank of Ukraine and the Central Securities Depository are developed by the National Securities and Stock Market Commission upon the approval of the National Bank of Ukraine.

In case a decision on transference of the abovementioned securities for depository servicing to the Central Securities Depository is taken and such transference takes place, legislative provisions related to exercising depository activity of the National Bank of Ukraine lose validity.

9. Since this Law is published, an issuer of eligible securities can choose only book-entry form of securities upon securities issuance; such issuer can conclude an agreement on issuance servicing only with the National Depository of Ukraine.

Within three months since the Central Securities Depository’s Rules are registered with the National Securities and Stock Market Commission issuers of eligible registered securities shall provide their existence in book-entry form as well as conclude an agreement with the Central Securities Depository on servicing securities issuance.

Eligible registered securities, which issue was registered before this Law publication, can exist in a documentary form till this Law comes into force.

10. An owner of dematerialized securities shall apply to a depository institution selected by an issuer and conclude an agreement with it on servicing a securities account on one’s own behalf or transfer rights in securities to its securities account opened with another depository institution.

If within one year since this Law comes into force a securities owner has not concluded an agreement with a depository institution selected by an issuer on servicing a securities account on one’s own behalf or has not transferred rights in securities to its securities account opened with another depository institution, such owner’s securities (giving a right to participate in the issuer’s bodies) are not considered upon defining a quorum and upon voting in the issuer’s bodies.

Restrictions related to considering securities upon defining a quorum and upon voting in the issuer’s bodies are imposed by a depository institution in the depository record-keeping system within one business day after a term indicated in abstract two of this item has expired.

A depository institution cancels such restrictions within one business day after a securities owner has concluded an agreement on servicing a securities account with a depository institution.

National Securities and Stock Market Commission defines peculiarities of depository record-keeping of securities, rights in securities, which owners have not met requirements of abstracts one and two of this item as well as a procedure of imposing and cancelling restrictions envisaged by abstract three of this item.

11. On the date of the Central Securities Depository’s Rules registration a stake of the state together with the National Bank of Ukraine in the Central Securities Depository’s share capital shall exceed 50 percent.

12. On the date of registration of Rules of the Settlement Center servicing transactions in financial markets a stake of the National Bank of Ukraine in the share capital of the Settlement Center servicing transactions in financial markets shall exceed 75 percent.

In 5 years after this Law has come into force the National Bank’s of Ukraine stake in the share capital of the Settlement Center servicing transactions in financial markets can be reduced to not less than 25 percent plus one share.

Within 5 years after this Law has come into force the Cabinet of Ministers of Ukraine together with the National Bank of Ukraine shall reduce the State’s and the National Bank’s of Ukraine stake in the share capital of the Central Securities Depository to not less than 25 percent plus one share.

13. Within one year since this Law publication securities depositories shall transfer all global certificates for safekeeping to the National Depository of Ukraine considering requirements of the National Securities and Stock Market Commission.

Since the day when a global certificate has been transferred for safekeeping to the National Depository of Ukraine, the National Depository of Ukraine is assumed to be a legal successor of other depositories’ rights and obligations arising from agreements on servicing securities issuance concluded between issuers and depositories.

14. Since this Law has come into force, the National Depository of Ukraine executes issuers’ instructions (transactions) in regard to securities, which global certificates had been deposited with another depository, provided a corresponding agreement on servicing securities issuance has been concluded with the National Depository of Ukraine.

15. In six months since this Law has come into force all book-entry securities are blocked on the owners’ securities accounts opened with custodians and on the accounts of such custodians opened with depositories, except for the National Depository of Ukraine, as well as on the depositories’ accounts opened with the National Depository of Ukraine until such issues’ global certificates have been transferred for safekeeping to the National Depository of Ukraine.

16. Within a six-month period the National Securities and Stock Market Commission together with the National Bank of Ukraine shall take required measures to bring activity of legal entities having on the day of this Law publication valid licenses for exercising depository activity of a depository according to the Law of Ukraine “On National Depository System and Peculiarities of Electronic Circulation of Securities in Ukraine” considering the establishment of the Central Securities Depository on the basis the National Depository of Ukraine, Public Joint-Stock Company, in compliance with this Law’s requirements.

President of Ukraine V. Yanukovych

Kyiv July 6, 2012 N 5178-VI