For investment firms – НКЦПФР|НАЦІОНАЛЬНА КОМІСІЯ З ЦІННИХ ПАПЕРІВ ТА ФОНДОВОГО РИНКУ

Professional activity in capital markets refers to the activities of joint-stock companies, limited liability companies, or additional liability companies providing financial and other services in capital markets while carrying out any type of activity specified in Part 2 of Article 41 of the Law of Ukraine “On Capital Markets and Organized Commodity Markets.”

Trading in financial instruments includes the following activities:

sub-brokerage activity;
brokerage activity;
dealing activity;
financial instrument portfolio management activity;
investment consulting;
underwriting and/or underwritten placement;
non-underwritten placement.

Sub-brokerage activity is the activity of an investment firm that accepts orders from clients to enter into derivative contracts and execute legal transactions involving financial instruments on behalf of clients and submits the relevant orders for execution to another investment firm that performs brokerage activities.

Brokerage activity is the activity of an investment firm involving the entering into derivative contracts and the execution of legal transactions involving financial instruments at the expense and on behalf of clients, or at the expense of clients but on its own behalf.

Dealing activity is an activity of an investment firm related to entering into derivative contracts and executing legal transactions with financial instruments on its own behalf and at its own expense.

Financial instrument portfolio management activities are activities of an investment firm involving the management of portfolios of financial instruments consisting of one or more financial instruments and/or funds in the interests of clients.

Investment consulting is an activity of an investment firm that provides individual recommendations to a client at their request or on the initiative of the investment firm regarding the entering into derivative contracts, agreements on the replacement of a party to a derivative contract, and the execution of legal transactions regarding financial instruments and foreign exchange assets.

Underwriting is an activity carried out by an investment firm on its own behalf and/or on behalf of an issuer or offeror for a fee in accordance with the terms of an underwriting agreement.

Underwritten placement is an activity carried out by an investment firm on its own behalf in accordance with the terms of an underwriting agreement.

Non-underwritten placement is an activity carried out by an investment firm on behalf of an issuer or offeror in accordance with the terms of a placement agreement.

An investment firm, subject to the requirements of the law, may provide clients with the following additional services, if they are specified in a Resolution of the National Securities and Stock Market Commission on issuing it a license to conduct the relevant type of activity within the scope of professional activities in trading financial instruments and are entered in the register of professional participants in capital markets and organized commodity markets:

storage of financial instruments and client funds (including accounting for rights to securities and rights under them in client securities accounts as part of the depository activities of a depository institution), as well as disposal of financial instruments and client funds that are subject to collateral (including the exercise of rights under securities in the interests of the client);
providing clients with credits and loans for the entering into derivative contracts with the participation or intermediation of such an investment firm and executing legal transactions with financial instruments;
providing clients with advice on financing their economic activities, development strategies, and other related issues, as well as providing services and advice on the reorganization or purchase of corporate rights of legal entities;
services involving foreign exchange transactions in cases related to the provision of services by an investment firm to its client. Such services are provided in accordance with the requirements of the Law of Ukraine “On Currency and Foreign Exchange Transactions”;
conducting investment research and financial analysis or providing any other general recommendations related to transactions with financial instruments;
services related to underwriting;
providing guarantees for the fulfillment of obligations to third parties under contracts executed on behalf of the client of such an investment firm.

When conducting its activities in capital markets, an investment firm has the right to provide additional services provided for in part two of Article 44 of the Law of Ukraine “On Capital Markets and Organized Commodity Markets” (except for the depositary activities of a depositary institution provided for in paragraph 1 of part two of Article 44 of the Law of Ukraine “On Capital Markets and Organized Commodity Markets”) without obtaining additional licenses or other permits.

Requirements for the initial capital of applicants and licensees:

UAH 4 million for sub-brokerage, brokerage, or financial instrument portfolio management activities (provided that the applicant will have the right to receive funds and financial instruments from clients on their own account and dispose of them).

UAH 1.5 million for sub-brokerage, brokerage, financial instrument portfolio management, investment consulting, and non-underwritten placement (provided that such an applicant does not have the right to receive and dispose of a client’s funds and financial instruments on their own account).

UAH 22 million for dealing activities, underwriting, and/or underwritten placement.

The amount of the initial capital of an applicant who intends to provide an additional service of granting loans and credits to clients for the entering into derivative contracts and the execution of legal transactions involving financial instruments must correspond to the amount specified in the second or third paragraph of Clause 1 of Chapter 3 of Part II of the Licensing Conditions for Professional Activities in Capital Markets – activities related to trading in financial instruments, approved by the NSSMC Resolution dated 21 February 2024 No. 208, increased by UAH 2.5 million.

An applicant/licensee for conducting activities in trading financial instruments must own or rent one or more non-residential premises with a total area of no less than 20 sq. m. (except in the case of conducting only dealing activities or only investment consulting activities, when the premises may have an area of no less than 10 sq. m.).

A complete list of requirements for applicants/licensees is contained in the relevant regulatory documents:

Resolution of the National Securities and Stock Market Commission dated 21 October 2021 No. 982 “On Approval of the Procedure for Issuing, Suspending, and Terminating Licenses for Professional Activities in Capital Markets,” registered with the Ministry of Justice of Ukraine on 03 December 2021 under No. 1563/37185;

Resolution of the National Securities and Stock Market Commission dated 21 February 2024 No. 208 “On Approval of Licensing Conditions for Professional Activities in Capital Markets – Trading in Financial Instruments,” registered with the Ministry of Justice of Ukraine on 11 March 2024 under No. 349/41694.

The National Securities and Stock Market Commission assesses the credit, market, operational and liquidity risks of securities traders. The following indicators are used to measure and measure the risks:

SIZE OF REGULATORY CAPITAL. The minimum size of the regulatory capital of a securities trader should be not less than the minimum size of the authorized capital established by the legislation for the relevant type of securities trading activity, namely, dealership (not less than 500 thousand hryvnias), brokerage activity (not less than 1 million hryvnias) , underwriting and securities management (not less than 7 million hryvnia). If the trader also deals with the activities of the depositary institution, his regulatory capital should be not less than the minimum size of the authorized capital of the depositary institution.

NORMATIVITY OF REGULATORY CAPITAL ADEQUACY. It is calculated as the ratio of the size of the regulatory capital of the institution to the amount of assets weighted by the degree of risk. Normative value – not less than 8%.

NORMATIVE OF FIRST LEVEL CAPITAL ADEQUACY. It is calculated as the ratio of the amount of the capital of the first tier of the institution to the amount of assets weighted by the degree of risk. Normative value – not less than 4,5%.

FINANCIAL LEAFLET COEFFICIENT. Calculated as the ratio of the carrying amount of the total amount of liabilities (long-term and current) securities trader to the amount of its equity. Normative value – from 0 to 3.

COEFFICIENT OF ABSOLUTE LIQUIDITY. It is calculated as the ratio of the cost of highly liquid assets of the institution, which includes cash, their equivalents and current financial investments, to the amount of its current liabilities. Normative value – not less than 0,2.

Details of the prudential standards for securities traders can be found at the link.

A securities trader shall submit to the public information database of the National Commission on Securities and Stock Market information on all off-stock transactions carried out by him or with his participation in issues relating to issues of securities within three working days after the date of execution of the transaction. The following information is released:

The date on which the information was compiled
Date of the transaction (fulfillment of the contract of sale)
Type of transaction (in accordance with Guideline 15)
Name of the securities issuer under the transaction
Code under the USREOU of the issuer of securities under the transaction
Type of financial instrument that is the subject of civil rights under the transaction (in accordance with Guideline 7)
International Identification Number of the security
Number of securities by transaction
The price of securities by transaction

The securities trader lodges with the Commission two types of administrative data: monthly (no later than the last day of the month following the reporting period) and irregular (within 3 business days after the date of the occurrence of irregular data).

Monthly data is comprised of:

certificates about securities trader;
certificates of non-executed one-time orders and contracts with securities or other financial instruments of a securities trader as of the last day of the reporting month;
certificates on financial instruments held by the securities trader as of the last day of the month (other than securities of own issues);
certificates of securities and / or funds held in the management of a securities trader as of the last day of the reporting month;
certificates of securities trader standards when performing margin operations (except for banks);
certificates on the prudential norms of a securities trader (except for banks);
reference data for the calculation of the indicator of the size of regulatory capital (except for banks);
reference data for the calculation of the regulatory capital adequacy ratio, the first-tier capital adequacy ratio, the ratio of the financial leverage and the absolute liquidity ratio (except for banks);
reference data for the calculation of the amount of assets weighted by the degree of risk (except for banks);
certificates on the calculation of the operational risk coverage ratio (except for banks);

The data for the month of December include the certificate on the total amount of concluded and executed contracts with securities or other financial instruments of the securities trader for the year.

The data for March, June, and September include interim financial statements (except for banks), the requirements of which are set by the relevant legal act.

The data for the month of February include annual financial statements (except for banks), the requirements of which are set by the relevant regulatory act.

Irregular Data consists of a certificate of executed or terminated contracts with securities or other financial instruments of a securities trader in an unorganized market.

More information about the formation of certificates can be found at the link.

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