Article 3-3. Supervisory response measures of the Securities Market Law

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1. In order to protect the legitimate interests of clients of professional securities market participants, investors in the securities market, ensure the financial stability of professional securities market participants, prevent deterioration of their financial situation and increase the risks associated with professional activities in the securities market, the authorized body applies to professional securities market participants, major participants of investment portfolio managers, persons who have the characteristics of a major participant managing an investment portfolio, as well as supervisory response measures to senior staff of professional securities market participants.

2. The grounds for the application of supervisory response measures are:

1) violation of the legislation of the Republic of Kazakhstan on issues within the competence of the authorized body;

2) deficiencies and (or) risks in professional activity in the securities market identified by the authorized body within the framework of exercising control and supervision functions, including through the use of reasoned judgment, which may lead to the creation of a situation threatening the stable functioning of professional securities market participants and (or) the interests of clients of professional market participants securities and (or) investors in the securities market;

3) identification of illegal actions or omissions of senior officials that may threaten the stable functioning of professional participants in the securities market and (or) the interests of clients of professional participants in the securities market and (or) investors in the securities market;

4) sufficient data to recognize the actions (inaction) of a senior employee(s) as not complying with the requirements of the legislation of the Republic of Kazakhstan on matters within the competence of the authorized body, and (or) indicating damage to professional participants in the securities market, and (or) its clients, and (or) investors in the securities market papers;

5) the commission of actions by a major participant in the investment portfolio manager, by a person who has the characteristics of a major participant in the investment portfolio manager, as a result of which damage has been caused or may be caused to the investment portfolio manager;

6) unstable financial situation of a major participant in the investment portfolio manager, a person who has the characteristics of a major participant in the investment portfolio manager;

7) failure to comply with the supervisory response measures previously applied in accordance with this Law;

8) failure to submit to the authorized body or the National Bank of the Republic of Kazakhstan, or submission of false reports or information, as well as other information requested by the authorized body or the National Bank of the Republic of Kazakhstan;

9) obstruction of an audit by a professional participant in the securities market, a major participant in the investment portfolio manager, which made it impossible to conduct it on time.;

10) failure by a professional participant in the securities market, a major participant in the investment portfolio manager, to eliminate deficiencies that affect the financial condition of a professional participant in the securities market indicated in the audit report, within the time limits provided for in paragraph 6 of Article 55-1 of this Law.

11) failure to submit to the authorized body, within the prescribed time, the action plan provided for in paragraph 2 of Article 3-2 of this Law, disapproval by the authorized body, non-fulfillment or late execution of the measures of this plan, failure to eliminate the factor(s) affecting the deterioration of the financial situation of the organization engaged in brokerage and (or) dealer activities in the securities market and (or) investment portfolio management activities, within the time limits set by the action plan and (or) the authorized body.

3. When determining the appropriateness of applying supervisory response measures and selecting a supervisory response measure, the following factors are taken into account::

1) the level of risk, the nature of violations and (or) deficiencies and their consequences;

2) the scale and significance of the violations and (or) deficiencies and their consequences;

3) the systematic nature and duration of violations and (or) deficiencies;

4) the impact of violations and (or) deficiencies on the financial condition;

5) the ability to correct the situation as a result of the chosen supervisory response measure;

6) availability and effectiveness of previously applied supervisory response measures;

7) adequacy of the applied supervisory response measure to the grounds for its application;

8) the reasons that led to the occurrence of the identified violations and (or) deficiencies and (or) risks;

9) the adoption by a professional participant in the securities market, a major participant in the investment portfolio manager, of independent measures aimed at eliminating violations and (or) deficiencies identified in their activities, the effectiveness of the implementation (non-implementation) of specific measures in this regard and (or) willingness to take such measures.

4. The authorized body applies the following supervisory response measures:

1) advisory supervisory response measures in accordance with Article 3-4 of this Law;

2) measures to improve the financial condition and/or minimize risks in accordance with Article 3-5 of this Law;

3) compulsory supervisory response measures in accordance with Article 72-3 of this Law.

5. The authorized body has the right to apply any of the supervisory response measures defined in paragraph 4 of this article to a professional participant in the securities market, a major participant in an investment portfolio manager, or a person with the characteristics of a major participant in an investment portfolio manager, regardless of the supervisory response measures previously applied to them.

6. The procedure for the application of supervisory response measures is established by a regulatory legal act of the authorized body.

The Law of the Republic of Kazakhstan dated July 2, 2003 No. 461.

 This Law regulates public relations arising in the process of issuance, placement, circulation and repayment of equity securities and other financial instruments, the specifics of the creation and operation of securities market entities, defines the procedure for regulation, control and supervision of the securities market in order to ensure the safe, open and effective functioning of the securities market, protection of investors' rights. and holders of securities, fair competition of securities market participants.

President

Republic of Kazakhstan

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