On 8 February 2013 the resolution of the National Securities and Stock Market Commission (the "Commission") "On Approval of Procedure for Foreclosure Sale of Securities on Stock Exchanges" (the "Procedure") became effective.

According to the Procedure, the foreclosure sales shall be carried out through an auction on a stock exchange, which has:

• general license of a stock exchange;
• electronic trading system;
• rules establishing the procedure for such auction sales;
• an agreement with the State Executive Office ("SEO").

To hold the auction, SEO signs an agreement with a licensed securities trader (seller). The trader's fee cannot exceed 3 percent of the sale price.

The trader must meet a number of criteria. In particular the trader must:

• hold a general license of a securities trader;
• hold the license of a securities custodian;
• be a member of the stock exchange, which has an agreement with SEO;
• not be held liable for stock market violations during the last year.

The Procedure establishes the following basic rules for holding the auction:

• the exchange shall fix the date and time for holding the auction not earlier than 20 days after the seller's application;
• the exchange shall publish the relevant information in mass media and on its website not later than 15 days prior to holding the auction;
• a client intending to buy securities must, as of the moment of filing the application to buy securities, have a securities account opened with a securities custodian;
• the window for filing applications to participate in the auction must be at least 10 days;
• buyers are admitted to the auction only upon payment of a refundable guarantee fee of 20 percent of the initial lot price.

In general, the adoption of the resolution became quite a positive event, which had been long expected by the stock market. It has put in place an effective procedure for the foreclosure sale of securities during enforcement proceedings. At the same time, due to a fairly general nature of many provisions of the Procedure, it is obvious that its successful application will in practice require further work.

Some other resolutions of the Commission also became effective in February 2013, in particular, those regulating (i) prudential standards for depository operations, requirements for risk management systems, securities trading and management of institutional investors' assets, and (ii) changes to the rules for licensing professional operations on the stock market.

For further information please contact partner Vadym Samoilenko
and senior associate Oles Kvyat