National Depository or Registry of Monopolies?

The stock market, where something like a Brownian motion of shares constantly goes on, is a unique indicator of business activity in our society and of certain enterprises and industrial sectors. Shares are sold and resold, passing through many hands. And world experience knows numerous cases where swindlers used this perpetual motion to their advantage. To prevent this from happening there are special institutions abroad, depositories and registrars, which legally register shareholders and the quantity of shares they own; and also record transfers from one shareholder to another.

Something similar is being set up in Ukraine. They have also established the Professional Association of Registrars and Depositories (PARD) uniting structures independent from the state. However, it is understandable that the state cannot remain totally aloof from this process. Now the work on forming the open stock company National Depository of Ukraine is being developed. The National Bank of Ukraine and the State Committee on Securities and the Financial Market (SCSFM) will be its cofounders. The NBU intends to hand over to the company's authorization fund property totaling Hr 400,000, while the State Committee hopes to attract Hr 4.5 million from the state budget to cover its share in the authorization fund. This way the state will have a 90% share of National Depository stock.

Potential non-state participants of the National Depository, represented by PARD, also participate in the work of the organizing committee to set up the National Depository.

However, at a recent PARD conference anxiety was expressed regarding the further distribution of functions between state and private depositories. It is stated in its founding documents that the National Depository will concentrate its attention on questions of procedural standardization in the national depository system, codification of stock issues, and oversight of international correspondent relations in this sphere. The Depository's constitutive documents also stipulate functions, peculiar to such self-governing organizations as registrars.

PARD president Petro Hordiyenko told The Day that this causes much anxiety among his association's members. All the more, according to the SCSFM explanations, the National Depository of Ukraine open stock company will be subject to the law On Economic Societies only until its state registration. Then it will guided by the state committee's decisions. Its decision No. 157, registered in the Ministry of Justice on November 26, is the evidence of what this could bring. This decision grants the National Depository exclusive right to close deals with other countries' depository establishments on the sale, serving, and placing abroad of stock from Ukrainian issuers as well as of American and global depository receipts. Noting that such stock papers of some Ukrainian issuers such as Ukrrichflot (Ukrainian River Fleet), Ukrnafta (Ukrainian Oil), and others, which are presently distributed abroad by independent commercial structures, this could not help but raise suspicions that SCSFM wants to monopolize the stock market.

COMMENTARY

Commenting on the current situation, the stock department head of Zeus Commercial Bank Oleksandr Ivantsov stated that according to most market participants, the Interregional Stock Union Depository successfully fulfills the functions of the top link of the national depository system, which is quite effective because of it. According to him, forming the National Depository of Ukraine will not have any influence upon solving the main questions such as the clearing functions of the system, adopting the needed norms and rules, and filling the system with depository assets. Only 3000 of Ukraine's 12,000 joint stock companies have chosen the documentless (paperless) form of stock issuance. Because of this, Ivantsov is certain that the National Depository will have no significant influence on the development of Ukraine's stock market. At the same time, the SCSFM decision that after registration the National Depository will not be guided by the law On Economic Societies could considerably influence foreign partners' opinions of its legitimacy.