Securities Transaction Law (2013, Pyidaungsu Hluttaw Law No. 20) The 9 th Waning of Waso M.E (30 th July 2013)

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1 Securities Transaction Law (2013, Pyidaungsu Hluttaw Law No. 20) The 9 th Waning of Waso M.E (30 th July 2013) The Pyidaungsu Hluttaw hereby enacts this Law. Chapter 1 Title and Definition 1. This law shall be called the Securities Transaction Law. 2. The expressions contained in this law shall have the meanings given hereunder: (a) The following items are included in the meaning of "Marketable Securities" (1) Short term treasury bonds, long term treasury bonds, secured debentures and unsecured debentures issued, or whose issuance was decided, by the government or any government organization; (2) Short term public bonds, long term public bonds, secured debentures and unsecured debentures issued by an international organization, a foreign government or their organizations; (3) Shares, stocks, secured debentures and unsecured debentures, as well as rights, options and warrants concerning shares, stocks, secured and unsecured debentures, that are issued, or whose issuance was decided, by a public company; (4) Other security certificates and instruments defined as "marketable securities" by the Securities Trading Commission by way of a notification. (b) "Securities Business" means any of the following activities: (1) Securities Trading; (2) Securities Brokerage; (3) Securities Underwriting; (4) Securities Investment Advisory; (5) Securities Safekeeping and Settlement; (6) Activities defined as securities business by notification of the Securities Trading Commission. 1

2 (c) "Securities Trading" means the buying and selling of Marketable Securities for one's own account; (d) "Securities Brokerage" means the implementation, by a Securities Company acting as an intermediary, of orders received from a client to buy and sell Marketable Securities in return for a commission, remuneration or other consideration; (e) "Securities Underwriting" means the function of subscribing to some or all of the Marketable Securities of a company in order to sell them to the public, or the function of assisting the issuer to sell Marketable Securities to the public; (f) "Securities Investment Advisory" means the function of providing investment advice with regard to Marketable Securities in return for a remuneration; (g) "Securities Safekeeping and Settlement" means the function of receiving Marketable Securities entrusted by a client, safekeeping Marketable Securities of a client, delivering Marketable Securities to a client, and assisting a client to exercise his rights as an owner of Marketable Securities, as well as the function of settling and delivering Marketable Securities that have been traded (including related services); (h) "Securities Market" means a market or place where Securities Business is regularly conducted. In this expression, systems to conduct Securities Business regularly are included; (i) "Securities Company" means a limited liability company established according to existing laws in order to conduct Securities Business; (j) "Stock Exchange" means an organized market that provides the systems and methods for the trading of Marketable Securities that qualify for a listing; (k) "Over the Counter Market" means an organized market for the trading of unlisted Marketable Securities; (l) "Share" means a share of the share capital of a public company. In this expression, stock is included unless shares and stock are expressly or impliedly differentiated; (m) "Warrant" means a Marketable Security that gives its holder the right to buy stock at a fixed date in the future for a fixed price; (n) "Transaction Confirmation Document" means a document that includes the details of a Securities Trading transaction and is delivered by the broker to the client and the issuing company; (o) "Listed Securities" means Marketable Securities that have been registered or [otherwise] admitted for trading at a Stock Exchange; 2

3 (p) "License" means the Securities Business license issued by the Securities Trading Commission according to this law; (q) "Commission" means the Securities Trading Commission formed on the basis of this law; (r) "Ministry" means the Ministry of Finance of the Union Government. Chapter 2 Objectives 3. The objectives of this law are as follows : (a) To make it possible to effectively assist the development of a market orientated economy; (b) To provide for the organized appearance of Securities Markets in order to collect longterm capital for the development of the national economy; (c) To develop the economic sector through the promotion of effective state and private financial businesses; (d) To supervise Securities Businesses so that they are operated smoothly and honestly; (e) To protect those who law abidingly participate in Securities Markets; (f) To support the financial policy of the government through the promotion of investments by the general public. Chapter 3 Establishment of the Commission and Its Duties and Powers 4. The Union Government: (a) Shall establish the Commission consisting of at least 5 suitable persons; (b) Shall, when establishing the Commission, appoint, at the same time, the chairman and the secretary out of the Commission members; (c) May decide the amount of the remuneration of the non government members and pay it. 5. (a) Always two Commission members shall resign in the prescribed order once in two years; (b) The Union Government may appoint suitable persons to fill vacancies and may reappoint members whose term of office has expired once or multiple times; 3

4 (c) A member must continue to perform his functions and duties after the expiry of his term of office until the Union Government has appointed a new member. 6. The Commission chairman shall serve as the head of the operations of the Commission. 7. The Commission: (a) May, after having scrutinized the application concerning a Securities Business, grant the License or refuse to issue the License; (b) May, if the License holder has breached any duties or conditions, revoke the License or suspend it for a period whose length is decided by the Commission; (c) May, after having scrutinized the application for renewal, extend the License period; (d) Shall collect the License fees and penalties in accordance with the rules. 8. The Commission: (a) May, after having scrutinized the application for the establishment and operation of a Stock Exchange, grant the License or refuse to issue the License; (b) May, if the Stock Exchange has breached any duties or conditions, revoke the License or suspend it for a period whose length is decided by the Commission; (c) May revoke the License issued to the Stock Exchange if any of the situations below arises: (1) Cessation of the business of the Stock Exchange for whatever reason; (2) Dissolution of the Stock Exchange; (3) Decrease of the number of member companies below the number stipulated as minimum; (4) The Stock Exchange conducts its business in contravention of the prohibitions set forth in chapter 9 and thereby considerably breaches the protection afforded to the public and to investors. 9. The Commission: (a) May approve applications to appoint an auditor for Securities Companies and Stock Exchanges after having scrutinized the applications; (b) May, in accordance with the rules, approve the articles of association of a Stock Exchange and their amendments. 10. The Commission may, if a group of Securities Companies, in accordance with the rules, applies to establish an Over the Counter Market and attaches the articles of association, grant the License. 11. The Commission: 4

5 (a) May submit necessary advice to the Union Government in connection with Securities Business matters; (b) May form necessary working committees and organizations and decide their functions and duties; (c) May, if necessary, issue directions to Securities Businesses, Over the Counter Markets and Stock Exchanges; (d) Shall supervise the Securities Exchange Businesses and make necessary inquiries and investigations; (e) Shall perform other functions and duties assigned by the Union Government. 12. The Commission shall supervise the following organizations and persons so that they keep record of the financial statements of their business in accordance with the relevant accounting system of the Union of Myanmar. Furthermore, the Commission may, from the following organizations and persons, request and obtain required financial statements, documents, accounts and other documents and information. (a) Public companies; (b) Securities Companies; (c) Over the Counter Markets; (d) Stock Exchanges; (e) Any person who works, or has worked, as a person in charge, member, employee or agent for a public company, Securities Company, Over the Counter Market, or Stock Exchange; (f) License holders and their lawyers, auditors or agents. 13. The Commission may carry out research and development for Securities Businesses and may engage with foreign Securities Business supervisory organizations and organizations engaging in related work in order to achieve compliance of Securities Businesses with international standards. 14. The Commission has the right to summon any concerned person, conduct investigations and obtain evidence if it has reason to believe that a person engaging in Securities Business violates prohibitions contained in this law or in rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law, thereby neglecting his duties and functions considerably, or if it has reason to believe that fraud or insincerity has occurred in a Securities Business. 5

6 15. Members and employees of the Commission must keep secret any information obtained in the performance of their duties and functions and refrain from expressing, posting and publicly announcing such information unless permitted by existing laws. Chapter 4 Securities Companies 16. Those who want to establish and operate a Securities Business through a Securities Company must establish a company and have it registered in accordance with the existing laws concerning Myanmar companies. 17. When establishing a Securities Company: (a) The expression "Securities" shall be included in the name of the company; (b) The company shall be established as a private company limited by shares; (c) The company shall have the minimum authorized capital and paid in capital in accordance with the rules; (d) The company shall be in compliance with the rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law. 18. The Securities Company has the right to operate any Security Business permitted by the License of the respective type after it has obtained any of the types of Licenses from the Commission. 19. The persons in charge and the managers of the Securities Company shall, when dealing with clients, be effective and fair and provide the services in an honest way. 20. The Securities Company: (a) Shall create and keep financial statements and records of the Securities Business in accordance with the rules; (b) Shall acquire the approval of the Commission before appointing an auditor according to the existing laws related to Myanmar companies; (c) Shall send audit reports to the Commission in accordance with the rules; (d) Shall not reduce the authorized capital without prior approval of the Commission; (e) Shall send business reports to the Commission in accordance with the rules; (f) Shall deliver the Transaction Confirmation Document on the sale or purchase of Marketable Securities to the person or organization for whom the Securities Company performed the transaction. 6

7 21. When carrying out the Securities Business, the Securities Company shall refrain from engaging in activities prohibited according to chapter 9 which affect the protection of the public and of investors. 22. The Securities Company: (a) Shall, at the end of each financial year, classify part of the net profit as a reserve according to the rules; (b) Shall use the reserve only to compensate for losses or damages related to the operation of the Securities Business; if the Securities Company wishes to use the reserve for other purposes, it has to obtain prior approval from the Commission. Chapter 5 Licenses 23. The following types of Licenses exist: (a) Securities Trading license; (b) Securities Brokerage License; (c) Securities Underwriting License; (d) Securities Investment Advisory License; (e) Securities Company Sales Agent License; (f) Other Licenses as defined by the Commission by notification. 24. The Commission shall stipulate the required qualifications and conditions for each License type. 25. Only Securities Companies may, in accordance with the rules, apply for one or more than one of the types of Licenses listed below: (a) Securities Trading License; (b) Securities Brokerage License; (c) Securities Underwriting License. 26. (a) A Securities Company having obtained any of the types of Licenses specified in section 25 may engage in Securities Investment Advisory without obtaining a separate License; (b) Any person who possesses the prescribed qualifications and fulfills the prescribed conditions may apply for a Securities Investment Advisory License with the Commission. 7

8 27. Any person wishing to work as a Securities Company Sales Agent may apply for a Securities Company Sales Agent License with the Commission in accordance with the rules; a recommendation letter from the Securities Company must be attached to the application. 28. The Commission: (a) May, after having received an application in accordance with sections 25, 26(b) or 27 and having scrutinized whether the applicant possesses the qualifications required for, and fulfills the conditions of, the respective License, grant the License or refuse to issue the License; (b) Must stipulate the terms and conditions and issue the License if it has granted the License according to sub section (a). 29. The License holder shall, if he wishes to continue the Securities Business after the expiry of the License, apply to the Commission for renewal at least 30 days in advance before the expiry of the License. 30. The Commission may, after having scrutinized the application for renewal in accordance with section 29, grant or reject the extension of the license period. 31. The Commission shall fix the License fees, renewal fees, penalties and License periods. 32. The License holder: (a) Shall abide by the rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law; (b) Shall abide by the terms and conditions of the license. 33. The License holder: (a) Shall return the License to the Commission within 30 days from its expiry if he discontinues the Securities Business; (b) Shall inform the Commission within 7 days of the suspension if he suspends the Securities Business during the License period and return the License to the Commission; (c) Shall obtain prior approval from the Commission if he wants to merge the Securities Business with another business organization or liquidate the Securities Company; (d) The Securities Company must suspend its business for as long as its assets are attached by virtue of an order or administered by a court appointed administrator. 34. The Commission may revoke the License or suspend the License for a certain period if any of the following situations arise: (a) Breach of any of the terms and conditions of the License or failure on the part of the License holder to perform his duties and functions; 8

9 (b) The License holder has rented the License out or transferred it by whatever method; (c) Breach of any of the prohibitions contained in this law or in the rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law, or failure to perform duties and functions under regulations relevant to the License holder; (d) Death, insanity or insolvency of the License holder; (e) The protection of the public and of investors has been impaired through activities prohibited in chapter 9; (f) The License holder has produced and submitted faked financial or business reports; (g) The License holder has been convicted for fraud, embezzlement, theft, breach of trust or moral crimes. Chapter 6 Issuance of Marketable Securities 35. A public company: (a) Shall, before making a public offering, submit the process document for the public offering of Marketable Securities and obtain approval from the Commission; the Commission shall decide within 60 days; (b) When making a public offering, a prospectus containing the important details of the company must be made public together with the company's memorandum and articles of association. 36. The Commission may specify the conditions for the issuance of new Marketable Securities by public companies. 37. A public company shall, if a buyer so requests after a transaction of Marketable Securities in a Securities Market, change the [name of the owner of the] Marketable Securities and register ownership change when having received the Transaction Confirmation Document delivered by the Securities Company. 9

10 Chapter 7 Stock Exchange 38. The Stock Exchange: (a) Is a corporate body established and operated in the form of a private limited company or joint venture company in accordance with the existing laws relating to Myanmar companies after authorization has been granted by the Commission; (b) Shall fulfill the function of organizing and supervising the trade of listed Marketable Securities; (c) Shall perform these functions in compliance with the provisions of this law; (d) Shall be under the management and supervision of the Commission. 39. (a) The board of directors of a Stock Exchange shall consist of not more than 5 persons appointed by the Commission and not more than 5 persons appointed by the member Securities Companies; it shall be established in accordance with its articles of association; (b) The Commission shall appoint, to the board of directors, persons who are well experienced and knowledgeable in the operation of a Stock Exchange or in Securities Business or financial business matters; (c) The board of directors of a Stock Exchange shall appoint one of the directors as its chairman; (d) The chairman may appoint one of the directors from the board of directors as secretary; (e) Required committees and bodies may be established; (f) Necessary staff must be appointed by the board of directors. 40. The Stock Exchange: (a) Shall perform the Securities Business only at the place specified by the Commission; (b) Shall appoint auditors with prior approval from the Commission; (c) Shall annually submit an audit report to the Commission; (d) Shall abide by the rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law. 41. The duties of the board of directors of a Stock Exchange are as follows: (a) Managing the Securities Business; (b) Specifying the standards for listing Marketable Securities on the Stock Exchange; (c) Registering Marketable Securities traded at the Stock Exchange; 10

11 (d) Producing and keeping the books and records of the transactions in Marketable Securities effectuated at the Stock Exchange; (e) Producing and keeping the facts and data related to the member Securities Companies; (f) Specifying, keeping and managing, in accordance with the articles of association and the operating rules, the membership fees, listing fees, reserve funds and other services fees; (g) appointing required staff and specifying their duties; (h) inspecting and supervising member Securities Companies as to whether their conduct is in order. 42. The powers of the board of directors are as follows: (a) Granting or rejecting, after scrutinizing, applications by Securities Companies to become a member; (b) Specifying the minimum number of member Securities Companies; (c) Specifying the rights and duties of member Securities Companies; (d) If there is sufficient reason for it, temporarily suspending trade at the Stock Exchange or temporarily prohibiting the trade of any of its members; (e) Suspending or revoking the membership of unsuitable member Securities Companies; (f) Resolving disputes between members or between members and other persons. 43. The Stock Exchange shall amend its articles of association and its operating rules, or draft new articles of association, only after having obtained prior approval from the Commission and in compliance with the rules. Chapter 8 The Over the Counter Market 44. An Over the Counter Market may be established by not less than three Securities Companies applying collectively to the Commission and obtaining approval. 45. (a) When establishing an Over the Counter Market with the approval of the Commission according to section 44, a board of directors of the Over the Counter Market consisting of not more than five directors must be appointed by the member Securities Companies. (b)the board of directors of the Over the Counter market shall appoint one chairman from the board of directors. (c)the chairman of the Over the Counter Market may appoint one of the directors as secretary. 11

12 46. An Over the Counter Market which was established with the approval of the Commission shall be a corporate body with perpetual succession, an official name and a company seal and with the right to sue and be sued under the company name. 47. The Over the Counter Market shall abide by the rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law. 48. The Commission may revoke or temporarily suspend the License issued to an Over the Counter Market if the Over the Counter Market engages in activities prohibited in chapter 9, thus considerably impairing the protection of the public and of investors. Chapter 9 Prohibited Activities 49. The prohibited activities impairing the protection of the public and of investors are as follows: (a) Activities, either performed directly or indirectly, consisting in fraud, deception, misrepresentations or omissions of important facts, thus giving rise to an important misunderstanding and thereby influencing the Securities Markets or the public offering, listing, purchase and sale or transactions of Marketable Securities, the investment in Marketable Securities or services related to Marketable Securities; (b) Publicizing false information in order to incite or induce [potential victims] to buy or sell Marketable Securities of others; publicizing information that significantly affect the price of Marketable Securities in the market in an incomplete or untimely manner; (c) Using insider information to buy or sell Marketable Securities for one's own or for someone else's account, announcing or providing insider information to others or advising others in order to entice them to buy or sell Marketable Securities on the basis of unpublicized insider information; (d) Conspiring to buy or sell Marketable Securities in order to create false supply or demand; conspiring with others, or instigating others, to trade or use trading methods consisting in continuous buying and selling in order to manipulate the price of Marketable Securities. 12

13 Chapter 10 Securities Safekeeping and Settlement 50. (a) If a Securities Company intends to engage in the business of Securities Safekeeping and Settlement, it has to apply for a License with the Commission in accordance with the rules; (b)the Commission may, after having scrutinized the application filed according to subsection (a), specify the terms and conditions and grant the License or refuse to issue the License. 51. A Stock Exchange intending to engage in the business of Securities Safekeeping and Settlement does not require a License, but must inform the Commission of its intention. 52. If required, the Ministry may specify the terms and conditions and order any suitable government department or organization to engage in the business of Securities Safekeeping and Settlement. Chapter 11 Appeals 53. (a) Any person who is unsatisfied with a decision passed by the board of directors of a Stock Exchange in accordance with section 42 may appeal to the Commission within 30 days from the date at which the decision was passed; (b)the Commission may, after having scrutinized the appeal filed according to sub section (a), uphold the decision of the board of directors of the Stock Exchange, amend it, or pass another suitable decision. Chapter 12 Prohibitions and Penalties 54. No one is allowed to violate the prohibitions to impair the protection of the public and of investors set forth in chapter No one: (a) is allowed to engage in any Securities Business without a License; (b) is, without a License from the Commission, allowed to establish a Stock Exchange or an Over the Counter Market, to perform the duties and functions of a Stock Exchange or an Over the Counter Market, or to perform duties and functions that are similar to those of a Stock Exchange or an Over the Counter Market; 13

14 (c) is, without a License from the Commission, allowed to use the name of an official Stock Exchange or Over the Counter Market or to falsely pretend to be a member of a Stock Exchange or Over the Counter Market. 56. No License holder is allowed to rent the License out or transfer it by any means. 57. A Securities Company is not allowed to engage in Securities Business in its own name through other persons or organizations than its own Securities Company Sales Agents possessing a License. 58. Members and employees of the Commission must refrain from expressing, posting and publicly announcing any information obtained in the performance of their duties and functions to unconcerned persons unless permitted to do so by existing laws. 59. No person in charge and no manager of a Securities Company is allowed to work for another Securities Company or another company or another entrepreneurial organization without the permission of the Commission. 60. Anybody convicted of having violated the prohibition contained in section 54 shall be punished with imprisonment for not more than 10 years and with a fine. 61. Anyone is convicted of having violated any prohibition contained in section 55 shall be punished with imprisonment for not more than 5 years, or with a fine, or with both. 62. Any License holder convicted of having violated the prohibition contained in section 56 shall be punished with imprisonment for not more than 5 years, or with a fine, or with both. 63. Any person in charge of a Securities Company convicted of having violated the prohibition contained in section 57 shall be punished with imprisonment for not more than 5 years, or with a fine, or with both. 64. Any member or employee of the Commission convicted of having violated the prohibition contained in section 58 shall be punished with imprisonment for not more than 3 years, or with a fine, or with both. 65. Any person in charge and any manager of a Securities Company convicted of having violated the prohibition contained in section 59 shall be punished with imprisonment for not more than 3 years, or with a fine, or with both. 66. Anyone convicted of having violated any prohibition contained in the rules, regulations, detailed rules, notifications, orders, instructions or procedures passed according to this law shall be punished with imprisonment for not more than one year, or with a fine, or with both. 14

15 Chapter 13 Miscellaneous 67. During the transitional period until Securities Markets are really established in Myanmar and methodically operated according to this law: (a) the Union Government shall specify the transitional period and may, if necessary, extend this period; (b) the Union Government shall assign the Ministry to supervise the Commission and the Securities Businesses during the transitional period; (c) the Ministry may issue the necessary notifications, orders and instructions to supervise the Securities Businesses in the transactional period; (d) the Ministry may allow any joint venture company established by Myanmar Economic Bank and any non financial organization to perform the functions of a Stock Exchange and an Over the Counter Market, regardless of the provisions contained in the Financial Institutions of Myanmar Law. 68. The expenditures of the Commission and the Commission office shall be paid for from funds attributed by the Union Government. 69. The offences under this law are cognizable offences [i.e. arrests may be made without an arrest warrant]. 70. No offence under this law shall be adjudged at any court without the prior permission of the Commission. 71. When implementing the provisions of this law: (a) the Ministry may, after consultation with the Commission, issue necessary rules, regulations and detailed rules with the approval of the Union Government; (b) the Ministry and the Commission may, if required, issue notifications, orders, instructions or procedures. I hereby sign according to the constitution of the Republic of the Union of Myanmar. Thein Sein President Republic of the Union of Myanmar 15