Consumer protection in capital markets: Commission proposed legislative amendments

Consumers of capital market services will be able to resolve disputes with companies without going to court — through specially designated dispute resolution bodies. This mechanism is provided for in the draft Law of Ukraine No. 16029, prepared by the Cabinet of Ministers of Ukraine, which brings Ukrainian legislation in line with European consumer protection rules.

The National Securities and Stock Market Commission supports the introduction of such a mechanism and proposes to clearly enshrine in law the regulator’s powers necessary for its operation in capital markets and organized commodity markets.

The Commission also reviewed the draft Law of Ukraine No. 16036 and, within the scope of its authority, drew attention to the need to harmonize the terminology regarding derivatives in tax and specialized legislation.

What changes for consumers

The draft law No. 16029 provides for the introduction in Ukraine of the European model of out-of-court resolution of consumer disputes. Its practical purpose is to give consumers an additional way to protect their rights without having to go to court right away.

If a dispute arises between a consumer and a company regarding a service provided, it may be referred to a specially designated dispute resolution body. This should make consumer protection more accessible and simplify dispute resolution in cases where legal proceedings are too lengthy or complex.

With regard to capital markets and organized commodity markets, the draft law designates the Commission as the competent authority responsible for the operation of this system within the respective markets.

In particular, the Commission will have the authority to appoint dispute resolution bodies, maintain a list of them, and review complaints regarding their activities. Thus, consumers will gain not only a new mechanism for resolving disputes but also a transparent system for monitoring the work of the bodies to which they appeal.

At the same time, the draft law does not provide for corresponding amendments to the relevant law, which defines the Commission’s powers. This creates a legal inconsistency: the draft law provides for new functions for the regulator, but these are not enshrined in the legislation defining its jurisdiction.

The Commission proposed to address this gap and amend the Law of Ukraine “On State Regulation of Capital Markets and Organized Commodity Markets” by adding a separate provision that would explicitly define its authority in the area of out-of-court resolution of consumer disputes.

For consumers, this means that the new mechanism must not only be provided for by legislation, but the regulator must also be clearly as responsible for the law’s implementation within the capital markets.

Harmonization of terminology for derivatives

The Commission also reviewed the draft Law of Ukraine No. 16036, which provides for amendments to the Tax Code of Ukraine as part of the effort to align Ukrainian legislation with EU law.

The Commission endorsed the draft law without raising any objections to its main provisions. At the same time, within the scope of its authority, it drew attention to a terminological inconsistency between the definitions of derivatives in the Tax Code and those of derivative contracts in the relevant capital markets legislation.

The Commission considers it necessary to standardize the relevant terminology in order to ensure the unambiguous application of legal provisions and to avoid differing interpretations of concepts related to capital market instruments.