• CHAPTER I.  GENERAL PROVISIONS
• CHAPTER II  SALE OF SECURITIES
• CHAPTER III.  REGISTRATION OF SECURITIES OF REPORTING ISSUERS
• CHAPTER IV  REPORTS, ACCOUNTING AND FILING OF REPORTS
• CHAPTER V.  PUBLIC TRADING IN SECURITIES
• CHAPTER VI.  PROXIES; TENDER OFFER
• CHAPTER  VII.  PROFESSIONAL PARTICIPANTS OF SECURITIES MARKET
• CHAPTER VIII.  PROFESSIONAL PARTICIPANTS OF SECURITIES MARKET
• CHAPTER IX.  SELF-REGULATORY ORGANIZATIONS
• CHAPTER X.   STOCK EXCHANGES
• CHAPTER XI.  THE CENTRAL DEPOSITORY
• CHAPTER XII.  THE SECURITIES COMMISSION OF THE REPUBLIC OF ARMENIA
• CHAPTER XIII.  EXECUTION OF CONTROLLING AUTHORITY OF THE COMMISSION; HEARINGS
• CHAPTER XIV.  LIABILITY AND VALIDITY OF CONTRACT
• CHAPTER XV  TRANSITIONAL PROVISIONS

CHAPTER I
GENERAL PROVISIONS

Article 1. Object of Regulation of Law

1. This Law regulates relationships that occur in connection with regulation of securities market activities and defines:
a)  the procedure for securities  issuance, distribution and their public trading;
b)  the procedure for activities of reporting issuers, disclosure of reports, submission of reports by managers of a reporting issuer and major shareholders of its equity securities;
c)  the procedure for performance of professional activities in the securities market;
d)  the procedure for the establishment  and activities of self-regulatory organizations;
e)  the procedure for the establishment and activities of the Securities Commission of the Republic of Armenia, as well as its authorities and obligations in the area of securities market regulation;
f)  the liabilities of professional participants of securities market for violation of the Law and other legal acts.

Article 2. Purpose of Securities Market Regulation

 The Purpose of this Law is:

a)  protection of investors;
b)   insurance of  transparency of activities of securities market participants;
c)   insurance of  effective operation, development and improvement of   securities market and  system of clearing and settlement of transactions in securities;
d)  establishment  and maintenance  of securities trustworthy  price formation system;
e)  safety of the use of money means and credit systems marked for securities and transactions in securities.

Article 3. The Legislation that regulates the Securities Markets

1. This Law, other laws and normative legal acts, the combination of which constitutes the securities market legislation, regulates the securities market of the Republic of Armenia.

2. The securities market of the Republic of Armenia (hereinafter also referred to as “the securities market”) includes stock exchanges that operate in the territory of the Republic of Armenia, the over-the-counter trading area and professional participants of securities markets.

Article 4. The Main Concepts Used in This Law

1. Under this Law:

The Prospectus is any communication, that is announcement, notice, note, publication, circular, advertisement or message (written, oral, by radio or TV, or other means of communication), which offers to sell security or contains an offer to purchase a security. The Prospectus does not include any of the following communications:
a)  a communication sent or provided after the effective date of the registration statement of the given security was registered, if the person who has received  the communication has also received a written prospectus meeting the requirements of Article 10 of this Law, or;
b)  if it just states from whom the written prospectus meeting the requirements defined under Article 10 may be obtained, including information about the class of the security and other characteristics that are necessary for its identification, states the price thereof, by who orders will be executed, and contains such other information as permitted by the decision (the normative legal act) of the Securities Commission of the Republic of Armenia.
Derivative security is any security, certifying the right or obligation to exercise (to perform) the investor’s rights or obligations within the specified period of time.

A person is any natural or judicial person.

Nominee is a person on whose name the securities owned by others by ownership rights are registered in the nominal securities owners’ registry, the Central Depository or with the custodian, without the right to transfer the ownership right on it.  Only brokers, dealers, custodians and trust managers may act as nominees.  Relationships between the nominee and the owner are regulated in accordance with the statute, the decision of Securities Commission of the Republic of Armenia and the contract.

Security is any investment, payment or title securities envisaged by the Civil Code of the Republic of Armenia and other laws on securities, and any profit-sharing agreement, any participation in such agreement or any document certifying such participation, option, futures or such other derivative security, preemptive right to purchase securities, certificate or receipt of depository, regardless of its form (materialized or de-materialized), as well as any investment agreement, which includes all or part of the above-mentioned characteristics of securities, any other document used for the purpose of attracting capital (funds), regardless of its form (materialized or de-materialized), as well as any right towards the security or any document, certificate, receipt or any such other  document, regardless of its form (materialized or de-materialized), if exercising or transfer of rights certified by such documents is possible only upon their submission or in case of their registration in special registry (in book entry or computer form).  A security is also any document, regardless of its form, which is considered as such based on the traditions of the business circulation.

The Same Class of Securities includes all securities of the given issuer, which have the same essential character and reserve essentially the same rights and privileges to their owners.

Issuance of a Security is the sale, directly of indirectly, of the given security to its first purchaser.  An Issuer is a person, who issues (or has issued) securities or a person, who makes an offer to issue securities.

Selling of a Security is any compensated transaction in securities trading, exchange or disposition.

Over-the-counter trading area includes transactions in securities executed out of the stock exchange in cases established by this Law and decisions (normative legal acts) ensued from it.

Equity Security shall mean any share of stock or other security that grants ownership share, membership or such other participation in the charter capital of the juridical person, as well as any security convertible into such security, or carrying any right to subscribe to such security, or its buy option, or other agreement (right).  Equity securities are solely nominal.

Beneficial owner of equity securities is any person, who, directly or indirectly, owns 10 or more percent of any class of equity securities of the reporting issuer registered or subject to registration in accordance with Chapter III of this Law.

Major shareholder of equity securities is any person, who, directly or indirectly, owns 20 or more percent of any class of equity securities of the reporting issuer registered or subject to registration in accordance with Chapter III of this Law.

Exchange shall mean any organization or group of persons, which organizes, provides, maintains, ensures or services a marketplace or facility for bringing together purchaser and sellers (or supply and demand) or performs the functions commonly performed by a stock exchange with respect to securities.  The concept of “an exchange” also includes the marketplace or the facility, which is used by the exchange for the above-mentioned purpose.

Registration Statement (hereinafter also referred to as “the statement”) is any securities registration statement defined by Chapters II and III of this Law, as well as any document constituting its part or attached to it, and any amendment to the registration statement.

Registered owner or holder is any owner or holder of a security, who is registered in the nominal securities owners’ registry.

Misrepresentation or omission of the material fact is provision of information that does not correspond to reality in relation to the given material fact, or non-inclusion of any material fact in any provision (announcement), the inclusion of which is required by the statute or other legal acts adopted in accordance with such statute, or the presence of which is necessary for it not to be misleading on the moment of including such provision (making the announcement).
 
The Minimum salary is the minimum salary rate established by the “Minimum Monthly Salary” Law of the Republic of Armenia.

Protection of investors is the protection of rights and legal interests of investors in securities that occur in relation to making investments in securities.

The fact or information shall be material if such fact or information is considered important in making decision on the purchase or the sale of the security.

Documents are incomplete, if they do not meet the requirements set forth by this Law and legal acts adopted in conformity with it.

An Institutional investor is:
a)  the bank, the insurance company, investment companies, funds  and any other such organizations;
b)  the person, who will be considered an institutional investor in accordance with the statute or the decision of the Securities Commission of the Republic of Armenia, based on knowledge and experience of that person in financial area, his ability to hire specialists with corresponding knowledge and experience, volume of his net assets or net assets under his management and other similar criteria.

The Commission shall mean the Securities Commission of the Republic of Armenia.

A reporting issuer is considered any issuer:
a) whose any security is registered  on any stock exchange, or
b) whose any securities of the same class (other than exempt securities as provided in Article 6 of this Law) has 50 and more registered owners, and whose net assets exceed the volume defined by the Commission.

Public Offering is any public offer to sell a security or any public offering to make an offer to purchase a security, or any other offering to sell or acquire a security, which has been made to more than 100 persons.  While defining the number of persons envisaged by this provision, institutional investors are not considered.

Public distribution is a sale of a security by any issuer, underwriter or a third person, which is performed through a public offering of a security.

Disclosure is considered dissemination of information by radio, television, and electronic means of communication or printed media.

Control or controlling is an opportunity to predetermine decisions of any person based on the power of overwhelming participation in its Charter Capital or in accordance with an agreement concluded with it.

Underwriter (subscriber) is any person, who acquires securities from an issuer with a view to distribute it, or offers or sells for an issuer in connection with the distribution of any security, or participates in any agreement or contract with respect to such undertaking, with the exceptions that may be defined by the decision of the Commission. As used in this provision the term “issuer” shall include any person directly or indirectly controlling or controlled by an issuer, or under direct or indirect common control with an issuer.

Any non-public distribution of securities is considered a private distribution. A distribution is private, if within its limits the offer has been made to more than 100 persons, and if such offer has not been disclosed. When defining the number of the above-mentioned persons, institutional investors are not considered.

Two or more persons are considered affiliated, if:
a)  anyone of them, who controls, by direct or indirect voting right, twenty  or more percent of equity securities of the other person(s);
b)  the majority of board members, the director or any other such official person of anyone of them, who at the same time is the board member, the director or such other official of the other(s);
c)  anyone of them has the possibility, fixed by an actual or contractual right, to have an essential impact on the decisions of the other, or if it is controlled by or is under the common control with the other;
d)  they are members of the same family or they have acted in accord, coming out of their mutual economic interests in that particular case.

Stock commodity is considered any foreign currency, bank ingots (standardized) of precious metals, coins as well as any credit resources.

Stock exchange is any exchange, which is registered with the Commission as a stock exchange in accordance with this Law.
 
2. Concepts defined in this Article and in other provisions of this Law apply only for purposes of this Law, as well as other laws and legal acts that are adopted in accordance with it or are directly referring to its provisions.  The terms may have different meanings in other laws and legal acts.
 

CHAPTER II
SALE OF SECURITIES

Article 5. Requirement for Prospectus in case of Securities Sales

1. It is prohibited to sell any security through a prospectus or otherwise, to deliver by mail or otherwise any security for the purpose of selling or delivering it to the buyer, to hand over or to transfer personally to the buyer by electronic means or otherwise, if the registration statement of such security has not been filed in accordance with the procedure defined by this Law.

2. It is prohibited to offer or solicit to offer to sell or buy a security through prospectus or otherwise, until the registration statement that includes the prospectus is filed with the Commission in accordance with the procedure defined by Article 8 of this Law and, in case if the statement has been rejected (suspended) in accordance with Article 11 of this Law.

3. It is prohibited  to publish, distribute or deliver by mail or otherwise a prospectus, to hand it over or to transfer personally to a purchaser by electronic mail or otherwise, if:
a) it does not meet the requirements set forth in Article 10 of this Law, and
b) the registration statement that includes the Prospectus, has not been filed with the Commission or has been rejected (suspended) by the latter in accordance with this Law.

4. It is prohibited to sell any security, to provide a security to a purchaser or any other person for purposes of selling, without providing a copy of the prospectus meeting the requirements set forth in Article 10 of this Law to the purchaser.  A prospectus is considered to be provided to the purchaser on the moment when the purchaser receives it in person, by electronic means or otherwise.

The security sale transaction may be declared invalid at the request of the purchaser, if the prospectus has been provided to him within 24 hours prior to the sale or after the sale.  Limitation of actions for this requirement shall be one year.

5. Under this Article in cases of electronic sales of securities the sales venue shall be considered the place where the sales offer is entered into the electronic communication system.

Article 6. Exempt Securities

Requirements defined by Article 5 of this Law do not apply to those transactions that are executed in any of the following securities:
a)  Any security issued or guaranteed by the State bodies of the Republic of Armenia or the communes;
b)  Any security issued or guaranteed by the Central Bank of the Republic of Armenia;
c)  Any security issued by any bank that is operating in the territory of the Republic of Armenia (other than  equity securities);
d)  Any insurance contracts issued by any insurance company operating in the territory of the Republic of Armenia;
e)  Any promissory note, draft, check or any other payment security, which has been issued for the current transaction performed within the  framework of activity of the given person, or the proceeds of which have been (are to be used) for such a current transaction, if its maturity at the time of issuance does not exceed nine months, excluding any grace period (during which the overdue security is nevertheless accepted for execution), any renewal or suspension of the maturity, which likewise shall not exceed nine months;
f)  Any security issued by exclusively religious, educational, benevolent and other non-commercial organizations;
g)  Any ticket or such other document of lottery or prize games, provided that loans are not extended from funds generated by such games;
h)  Any security the subject of which is exclusively a foreign currency  (currency options, spots, futures, etc.);
i)  Any security the subject of which is exclusively a commodity defined by the features typical to its type, including title securities.

Article 7. Exempt Transactions

1. Requirements defined by Article 5 of this Law shall not apply to any of the following transactions:
a)  transactions in securities by an issuer, which are private distribution;
b)  where securities of any issuer are exchanged by the issuer with its other securities, provided that additional fees are not required for such exchange and the fees are not directly or indirectly collected;
c)  securities sales (sales offer) solely to institutional investors, if no prospectus has been published in connection with the transaction by the issuer or anyone acting on the issuer’s behalf or for the issuer, and if the issuer informs the Commission, in the procedure defined by the latter, about exercising such exemption;
d)  transactions by a person in securities that belong to such person by ownership right (constitute a part of its assets), if the person is not an underwriter.  This exemption shall not include:
(1) transactions in securities by the issuer or an underwriter, which are taking place within forty days after the first date of actual public distribution of securities or within shorter period as shall be defined by the decision of the Commission;
(2)  transactions in the securities that constitute a part of the securities allocated to the person who is participating in the distribution, or are prescribed by the latter;
e) transactions by a broker upon a customer’s order on any stock exchange, if execution of transactions on that stock exchange is not prohibited in conformity with this Law.

Article 8. Filing of Securities Registration Statement

1. Securities registration statement shall be filed with the Commission in three copies and signed by the majority of members of the Board of Directors (or any other body with such powers), the executive director and the chief accountant of the issuer (if there is a board or any other executive bodies, by all members of such body).

If the issuer is a foreign person, its authorized representative in the Republic of Armenia shall also sign the registration statement.

If the issuer is a foreign state, or department or other body of the foreign state, only the underwriter, whose participation in issuance is obligatory in such case, shall sign securities registration statement.

2. At the time of filing a registration statement, the applicant shall pay the State due required by the statute.

3. The registration statement (as well as further amendments thereto) shall be deemed to be filed with the Commission upon the date when it is received by the Commission.

4. The Commission shall disclose, in the procedure defined by it, information contained in the registration statement and provide a copy of the registration statement upon a request of any person collecting copying (printing) costs.

Article 9. Information Required in Securities Registration Statement.  Signing of Registration Statement

1. The registration statement shall include all the information required in the prospectus, issuance and distribution costs, decisions and contracts required by the decision of the Commission with maximum three-year limitation period, or copies of such documents that are related to the issuance, as well as the written consent of affiliated persons that are not issuers to provide information about them in conformity with Article 10,1 of this Law.

2. If an expert opinion provided by an accountant, appraiser, advisor or any other expert is used in the registration statement, or if their expert opinion is received for the use in the registration statement, such opinion shall be signed by them and included in the statement, completely or partially, only in case of written consent of the person who has prepared the opinion, and shall be attached to the statement.

3. The presence of the written consent defined by the first paragraph of this Clause is not mandatory, when it is not possible to acquire for valid reasons. In such cases, the registration statement shall include a notice stating that it was not possible to acquire the written consent of the person.

Article 10. Information required in Prospectus

1. A prospectus shall contain all of the information defined by the decision of  the Commission, which is necessary for the protection of investors and shall relate to:

a)  the issuer, affiliated with it persons, its management system, bodies and persons  involved in the management, and beneficial owners of equity securities);
b)  previously issued securities of the issuer;
c)  financial condition of the issuer;
d)  activity of the issuer, its planned activity and  markets for the given activity;
e)  the issued securities.

2.  The information contained in the prospectus that is used for more than nine months after the effective date of the registration statement, shall not be out-of-date as of a date of use for not more than sixteen months, except for information defined by Clause 3 of this Article and such cases, when updating of information is not possible due to the lack of knowledge of any fact about such changes.

3.  Financial reports contained in the prospectus shall be submitted in conformity with the following procedure:
a)  After the end of a quarter, quarterly reports for that quarter shall be filed with the Commission, in conformity with the procedure defined by this Law, and shall be included in the Prospectus by the reporting issuer within 45 days after the end of that quarter;
b)  After the end of a fiscal year, the annual report (with an attached conclusion of an independent auditor) for that fiscal year shall be filed with the Commission, in conformity with the procedure set forth by this Law, by and including April the 30th of the year following the reporting year, and included in the Prospectus by the issuer.

4. In cases when there are material changes in the information contained in the prospectus, corresponding changes shall be made in the prospectus pursuant to the procedure defined by Article 11 of this Law.

5. In cases when a prospectus is disclosed by radio or television or any other means of telecommunication, copy thereof shall be filed with the Commission pursuant to the procedure defined by the decision of the Commission.

The Commission may require, in the procedure defined by its decision, filing of all the prospectuses (as well as any other document or announcement) that are used for the offer or sale of the securities registered in conformity with this Law.

6. The Commission is not liable for the accuracy and authenticity of information included in a prospectus.

A prospectus shall include a provision stating that filing of a prospectus with the Commission by no means shall mean safety of investments or accuracy and authenticity of information contained in the prospectus.  The approved by the Commission edition of the provision shall be placed in the first page of the written prospectus, in a conspicuous part and in bold letters.

7. If the registration statement, filed with the Commission in accordance with the procedure defined by this Law, is not rejected or its registration is not rejected (suspended), the prospectus for the securities envisaged by the registration statement shall contain a provision stating that the registration statement is not registered and the acceptance of the offer to sell the securities in the prospectus may take place only after the registration of the registration statement with the Commission in the defined procedure.  Such provision, approved in the edition made by the Commission, shall be placed in the first page of the written prospectus, in a conspicuous place and bold letters.

Article 11. Taking Effect of Registration Statement and Amendments Thereto

1. The effective date of a registration statement shall be the twentieth day after the filing thereof or such earlier date, with the exception of cases defined by Clause 2 of this Article.

If any amendment to the registration statement is filed prior to the effective date of the statement, it shall be deemed to have been filed on the date when such amendment was filed, except when such amendment is filed with the Commission with the consent or assignment of the Commission given prior to the effective date of the registration statement.

2. If prior to the effective date, it appears to the Commission that the registration statement is incomplete or essential inaccurate in any material respect, or contains misleading information, the Commission, after notice and the opportunity for hearing, issues a decision, by which the Commission refuses to permit such statement to become effective until it is amended in accordance with such decision.  The registration shall be deemed effective on the date when the Commission finds that the statement has been amended in accordance with the decision.  The Commission, within 10 days after receiving the above-mentioned amendments, after notice and providing an opportunity for hearing, shall issue a relevant decision.

3. An amendment filed after the effective date of the registration statement shall become effective in the procedure defined by Clauses 1 and 2 of this Article.

4. If the Commission finds, after notice and the opportunity for hearing, that the registration statement is incomplete or essentially inaccurate in any material respect, or contains misleading information or, if the due established by the statute is not paid within the specified period, the Commission shall issue a stop order adopted by its decision that suspends the registration of the statement.  The registration of the statement shall be reinstated on the date when the Commission, after notice and opportunity for hearing, finds that the statement has been amended in accordance with such order.  Within 10 days after receiving the above-mentioned amendments the Commission shall, after notice and providing an opportunity for hearing, make a decision.

5. The Commission’s decisions to reject (or stop) a registration may be appealed in court.

Article 12. Civil Liabilities for Violation of Requirements for Prospectus

1. Any security sale transaction executed in violation of the requirements set forth by Article 5 of this Law is void.

2. Except as provided in Clause 4 of this Article, any transaction is void as a transaction concluded under the influence of misapprehension having substantial significance, if by or in the frames of such transaction any person has offered (sold) a security by means of a prospectus or oral communication that misrepresented (omitted) any material fact, and the purchaser was not aware of it.

When determining the issue of recovering actual damage caused to the purchaser, the purchaser’s misapprehension is considered to be caused by actions of the person specified in the first paragraph of this Article.

3. When determining the size of the recoverable amount, the whole income received due to the transaction shall also include the income received by the purchaser due to the transaction in the security or sale of the security.

4. Any transaction envisaged by Clause 2 of this Article is not invalid, if the person who has executed the offer or sale of the security proves that he was not aware, or obviously could not have known of such mislead (omission).

5. In cases specified by Clauses 1 and 2 of this Article, the transaction is void by such part that relates to the offer (sale) of the security.  The remaining parts of such transaction shall be deemed valid, if otherwise is not defined by Civil Code of the Republic of Armenia.

Article 13. Civil Liabilities for Violation of Requirements for Registration Statement

1. If any part of the registration statement, when such part becomes effective, contained any misleading statement (omission) of a material fact, the purchaser of the security may claim to recover in court procedure the damage in the size defined by Article 15 of this Law,  and sue:
a)  every person, who signed the registration statement;

b)  every person, who in the procedure defined by Article 9, Clause 2, is an accountant, appraiser, advisor or any other specialist.  The persons specified under this sub-clause shall bear liability solely for the part of the registration statement, which contains expert opinion, statement, report, valuation or their part, and which was prepared or certified by such person.
c)  every person who is the underwriter of the security in conformity with the contract (agreement) signed with the issuer.

If the person acquired the security after the issuer had made generally available to its security holders an income statement covering a period of at least twelve months beginning after the effective date of the registration statement, his damage is subject to e recovered if such person proves that he acquired the security relying upon the registration statement and had no knowledge of such mislead (omission).

2. Persons specified in Clause 1 of this Article bear joint and several liability (with the exception of cases specified under Sub-clause b of this Article, when liability of two or more such experts who have signed the same document or the same part of such document shall be joint and several) as persons who have jointly caused such damage, and they enjoy the right of subrogation claim towards each other.

Article 14. Bases for Exemption from Liability

1. Except for the issuer, any person specified in Article 13 of this Law, shall not bear the liability on the bases provided therein, if he proves;
a) that before the effective date of the part of the registration statement with respect to which recovery is claimed:
(1) he has willfully resigned from or had taken such steps as are permitted by laws to resign from or refused or ceased to act in such office, position or capacity, in which he has named to be in the registration statement, and
(2) he had informed the Commission and the issuer about it in writing by declaring that he would not be liable for such part of the registration statement.

b)  that he was not aware of the fact that the registration statement had become effective and upon becoming aware of such fact he immediately took actions specified in Sub-clause a) of this Article and within reasonable time publicly announced that he was not liable for the corresponding part of the registration statement;
c)  after  a  reasonable investigation he had sufficient grounds to believe and believed that at the time the registration statement became effective there was no mislead (omission) in it, if the matter relates to such part of the registration statement, which was not prepared based upon an expert opinion or included part (an extract) of such opinion;
d)  after a  reasonable investigation he had sufficient ground to believe and believed that at the time the registration statement became effective there was no mislead or omission in it, or that such part of the registration statement did not reflect his opinion as an expert, or was not the exact copy of or extract from his written expert opinion, if the matter relates to such part of the registration statement, which was prepared based upon the expert opinion provided by himself or included part of his opinion;
e)  he did not have sufficient grounds to believe and did not believe that at the time the registration statement became effective there was mislead or omission in it, or that such part of the registration statement did not reflect the expert opinion provided by the specialist, or was not the exact copy of or extract from the written opinion of such expert, if the matter relates to such part of the registration statement, which was prepared based upon the expert opinion of such other expert or included part (extract) of such other expert opinion;
f)  he did not have sufficient grounds to believe and did not believe that at the time the registration statement became effective there was mislead or omission in it, or that such part of the registration statement did not reflect the expert opinion provided by the expert, or was not the exact copy of or extract from the written opinion of the expert, if the matter relates to such part of the registration statement, which was prepared based upon the official public document or announcement (a law, legal act, official announcements or publications of the government, state bodies or other officials) or includes part (extract) of it.

Under this provision the investigation is considered to be reasonable, if it has been performed in conformity with official, employment and contractual responsibilities of such persons.

2. If any person becomes an underwriter with respect to the security after the part of the registration statement with respect to which recovery of damage is claimed has become effective, then for the purposes of determining the liability of such person solely on the bases defined in Sub-clauses c, d, e and f, Clause 1 of this Article, the registration statement shall be considered as having become effective as of the date when such person became an underwriter.

Article 15.  Size of Damage Subject to be recovered

1. In cases specified in Article 13 of this Law, size of the recoverable damage shall be calculated as a difference between the amount paid for the security by the purchaser  and
a)  the value of the security as of the time such claim was brought, or
b)  the amount, which was received from the disposal of the security before the claim  was brought, or
c)  the amount, which was received from the disposal of the security after the claim was brought and before the judgment was made.

The amount of the recoverable damage defined under this provision shall not exceed the price at which such security was distributed to the public.

2. The recoverable damage, other than the damage provided in Clause 1 of this Article, also includes expenses of the person with damaged right that were made or will be made in order to recover the damaged right.

3. If, in cases defined in Article 13 of this Law, the respondent proves that the damage has not been caused in the result of the mislead (omission) of material fact in the registration statement, then such damage is not subject to be recovered.

4. In cases specified in Article 13 of this Law, the liability of the underwriter shall be limited to the price at which the securities underwritten by him and distributed to the public were offered to the public.  This provision does not eliminate the joint and several liabilities specified in Article 13, Clause 2 of this Law.

Article 16.  Liability of Controlling Persons

Every person, who by or through ownership of shares of stock, contract or agreement or otherwise (independently or with other persons), directly or indirectly, controls any person liable for damages on the bases defined in Articles 12 and 13 of this Law, together with the latter shall bear joint and several liability for recovery of such damage, provided that he proves that he did not know or did not have reasonable grounds to suspect about the existence of the facts that served bases for the liability.

Article 17.  Limitation of Actions

1. Limitation of actions for any liability, the bases for which are defined by Clause 2, Article 12 and Article 13, is one year starting from the date when the purchaser has discovered or should have discovered, if he had exercised reasonable diligence, the mislead (omission) of the material fact.

2. Any limitation of action defined by Clause 1 of this Article, is considered to be expired, if:
a) as regards any liability occurred on the bases defined in Article 13,  more than three years have passed from the day when the security was offered to the public;
b) as regards any liability occurred on the bases defined in Clause 2, Article 12, more than three years have passed from the date when the security was sold.

Article 18. Reports on Process and Results of Securities Distribution

1. After the end of every thirtieth day of commencement of public distribution, but no later than on the 15th day and within 30 days after the end of the distribution, the issuer shall file with the Commission a report on the process and results of the distribution.

2. The report shall contain the following information:
a) starting and closing dates of the public offering;
b) the price at which the securities were offered to the public and the average actual price at which the securities were sold;
c) the amount of sold securities.

3. The Commission shall define, by its decision, forms for the reports.
 

CHAPTER III
REGISTRATION OF SECURITIES OF REPORTING ISSUERS

Article 19.  Prohibition of Circulation of Unregistered Securities

1. Brokers and dealers are prohibited to execute any transaction in any security on any stock exchange operating in the territory of the Republic of Armenia, and the stock exchange is prohibited to allow the execution of such transaction (through listing or otherwise) if the security is not registered on the stock exchange in the procedure provided by this Law or other legal acts arising from it, or if the registration of the security is suspended, canceled or revoked.

2. This restriction does not apply to any transaction specified under Article 6, a, b, c and h of this Law.

Article 20. Application for Registration of Security

1. A security may be registered on an exchange by the issuer filing an application with the exchange, the duplicate original of which shall be filed with the Commission at the same time in accordance with the procedure prescribed by the decision of the Commission.

2. The application stipulated in Clause 1 of this Article shall contain information as to the issuer and any persons affiliated with the issuer, and any guarantor of the security as to principal or interest or both, as the Commission may by its decision require in respect to the following:
a) the organization, and nature  of the business;
b) previously issued securities and rights and privileges reserved by them, the forms and the terms of the issuance;
c) the terms on and forms of outstanding or to be issued securities;
d) the board members of the issuer, the directors, the chief accountant, other persons involved in the management, the underwriters and the beneficial  owners of equity securities, the  remuneration, and their interest in the capital or in any other securities of and their contracts with, the issuer or any persons listed in the first paragraph of this  Clause;
e) any persons whose remuneration that is established by the issuer exceeds ten million drams or ten thousand folds of the minimum monthly salary;
f) bonuses established by the issuer and profit sharing agreements;
g) contracts to which the issuer is a part of, if the price of such contracts exceeds the ten thousand folds of the minimum salary;
h) existing  options in respect of their securities;

i) balance sheets of not more than the three preceding fiscal years, profit and loss statements (financial results), changes in the own capital and reports as to the money mean certified  by an independent auditor;
j) quarterly financial statement required by the decision of the Commission.

3. Copies of the issuer’s charter and internal regulation and other documents as defined by the decision of the Commission, shall be attached to the registration statement defined under this Article.  Such attachments shall also include the written consent of any affiliated with the issuer persons that are not deemed to be issuers, about their consent to provide information about them in conformity with Clause 2 of this Article.

Article 21. Registration of Securities with the Stock Exchange: Trading Privileges to Unlisted Securities

1. If the stock exchange notifies the Commission (in the procedure defined by the latter) that the security has been approved for listing and registration, the registration of the security with the stock exchange shall be deemed effective on the tenth day upon receiving such notice by the Commission or within such shorter period of time when the Commission shall inform about not having any objection against the registration of the security.

Within the specified period of time the Commission may, after notice and opportunity for hearing, argue by its decision the registration of the security with the stock exchange if the submitted information or documents are incomplete.  In such case the securities are deemed registered with the stock exchange on the date, when the Commission finds that the statement is filled out in conformity with the decision of the Commission.  The Commission, within 10 days after receiving the above-mentioned amendments, shall issue a decision about not having any objection against the registration, or, after notice and opportunity for hearing, present its objections by issuing a new decision.

2. The stock exchange discusses the securities registration application within the time period defined by it, and may reject the registration of the security by submitting the copy of the rejection decision to the Commission.  The stock exchange may reject the listing and registration solely in cases when the issuer or its securities do not meet the requirement and conditions set forth by listing and registration procedure of the exchange, or if the information or documents presented for registration are incomplete.

3. Only the Commission is authorized to prescribe trading privileges (hereinafter referred to as “trading privileges to unlisted securities”) to any security listed on any stock exchange for it to be traded in any other stock exchange in the procedure set forth by the decision of the Commission.

Article 22. Withdrawal of Securities Registration with the Stock Exchange

1. Registration of a security with the stock exchange may be withdrawn (and the security de-listed) in accordance with decisions of the Commission and relevant to the rules of the stock exchange.

2. After the decision on striking the security from the registration becomes effective, the issuer shall be relieved from further compliance with the requirements set forth by Chapter IV of this Law and decisions (normative legal acts) adopted in accordance with it.

Article 23. Registration of Securities of the Reporting Issuer with the Commission

1. The reporting issuer is obliged to register its securities by submitting a registration statement to the Commission within 60 days after the fiftieth owner of such class of security is registered and when the volume of the net assets exceeds the size defined by the Commission.

The requirement set forth under this Clause does not apply to such securities that are registered with the stock exchange and any other securities exempted under Article 6 of this Law.

The issuer may also register, in accordance with this Article, such security, the registration of which is not required by this Article.

2. The registration statement shall contain information and documents defined by Article 20 of this Law and legal acts adopted in conformity with it.  The Commission shall define, by its decision, the procedure for the registration.  Any such securities of a reporting issuer, whose registration statements as provided in Article 9 of this Law becomes effective, are registered in summarily order prescribed by the decision of the Commission.

3. Any security is considered to be registered pursuant to this Article, on the thirtieth day after the Commission receives the statement or on such shorter period when the Commission registers the security.  Within the specified period the Commission may reject, after advance notice and opportunity for hearing, the registration of a security, if the submitted information or documents are incomplete.  In such case, the securities are deemed registered on the date when the Commission finds that the registration statement is submitted in conformity with the decision.  Within 10 days after receiving the above-mentioned amendments the Commission shall, after advance notice and opportunity for hearing, reject the registration by its decision.

Article 24. Volunteer Termination of Securities Registration with the Commission

1. The registration of securities with the Commission may be terminated in accordance with decisions of the Commission based upon the intercession submitted by the issuer, if the issuer substantiates that the number of registered owners of such security has reduced below 50 or the volume of the net assets is reducing below the size established by the Commission.  The intercession shall be discussed within 30 days, and may be rejected, after notice and opportunity for hearing, if it is not substantiated.

2. After the decision to stricken the security from registration becomes effective, the issuer shall be relived from further compliance with the requirements set forth by Chapter IV of this Law and decisions (normative legal acts) under it.

Article 25. Suspension or Revocation of Securities Registration

1. The Commission has the right, after notice and opportunity for hearing, to suspend the registration defined under this Article for not more than 12 months (including extension periods) or to declare the registration revoked, if the issuer of such security violates this Law and legal acts adopted thereunder and fails to pay the state due within the specified period.

2. Brokers and dealers are prohibited to perform any transaction in any unregistered or any other security, the registration of which is suspended or revoked.

Article 26. Public Availability of Information; Registration Fees

1. The Commission shall, in accordance with the procedure defined by it, make information contained in any registration application defined by Articles 20 and 23 of this Law, available to public. The Commission shall provide a copy of any registration application at the request of any person, collecting the duplication costs.

2. When submitting the registration application in accordance with Articles 21 and 23 of this Law, the applicant shall pay to the Commission the state due defined by the statute.

Article 27. Maintenance of Registry of Securities Owners of Reporting Issuers

Reporting issuers, whose securities are subject to registration in accordance with this Chapter of the Law, shall pass the maintenance of the registry of such security holders to the Central Depository in the procedure defined by this Law and decisions of the Commission, prior to their registration in conformity with this Chapter.

Article 28. Suspension of Trading in Securities in Summarily Order

1. The Commission is authorized, as it deems extremely necessary for the protection of investors, by its decision and by order summarily, to suspend (without an advance notice and opportunity for hearing) trading in any security (other than the securities exempted under Article 6 of this Law) for not more than 10 business days, including extension periods.

2. The Commission is authorized, as it deems extremely necessary for the protection of investors, to suspend by its decision and by order summarily, any transaction in any security (other than exempted securities, Article 6 of this Law) for not more than 90 business days (including extensions).

3. In cases when any of the measures envisaged by this Article are taken, the Commission shall immediately disclose the given decision, with proper substantiation.

4.  Under this Article the extreme necessity for the protection of the investors occurs when there is a significant threat to rights and legal interests of large sections of investors due to possible violations of this Law and decisions (normative legal acts) adopted thereunder or, when there is an emergency situation defined under Article 29 of this Law.

Article 29. Powers of the Commission in Emergency Situations

1. The Commission in an emergency situation, may by order summarily take such action to change or amend any acting requirements, or impose additional restrictions or requirements with respect to any area or matter subject to regulation by the Commission or a self-regulatory organization, for the purposes of:
a) maintaining or restoring natural flow of operation of securities market, or
b) ensuring operation of clearing and settlement system and through this, promptness, accuracy and safety of settlement and clearing of transactions in securities.
2. Such decision of the Commission becomes effective on the date and for the period determined by it, but may not be longer than 10 business days (including extension periods).
3. Under this Article “extreme situation” shall mean a major disturbance or crisis of securities market, or a substantial threat to such disturbance or crisis, which is characterized by:
a) sudden and excessive fluctuations of  securities prices or a substantial thereof, that threaten fair and orderly markets, or
b) a substantial disruption of the safe and efficient operation of clearing and settlement system of transactions in securities or a substantial threat thereof.

Article 30. Prohibited Actions.  Appeal of Decisions

1. Brokers and dealers are prohibited to execute any transaction in any security the sales of which is suspended in accordance with Clause 1, Article 28 of this Law, or which is executed in violation of the decision of the Commission defined in Clause 2, Article 28 of this Law.

Brokers and dealers are prohibited to execute any transaction or other operation in violation of the Commission’s decision stipulated by Article 29 of this Law.

2. Interested persons may appeal in court order the substantiation of any such order and decision of the Commission envisaged by Articles 28 and 29 of this Law.
 

CHAPTER IV
REPORTS, ACCOUNTING AND FILING OF REPORTS Article 31. Reports of Issuers

1. Every reporting issuer  shall file with the Commission, in the form and procedure defined by the decision of the Commission:

a) such information and documents, as the Commission shall define by its decision, necessary to keep current the information or attached therein documents required to be included in the registration statement  filed pursuant to Chapter III of this Law and the registration statement specified in Chapter II of this Law (if applicable to issuers);
b) annual financial reports (with the attached conclusion of an independent auditor) and quarterly financial reports.

2. Each reporting company, securities of which are registered with the stock exchange pursuant to Chapter III of this Law, shall furnish the stock exchange with copies of information, documents and reports prescribed in Clause 1 of this Law.

3. Notwithstanding cases stipulated by Clause 4 of this Article, every reporting issuer shall provide, in the form and procedure defined by the decision of the Commission, such information, documents and reports to owners or holders of such securities that are subject to registration pursuant to Chapter III of this Law.

4. Every reporting issuer, whose securities subject to registration pursuant to Chapter III of this Law have 500 and more owners, may meet the requirements defined in Clause 3 of the Article, by disclosing information, documents and reports in the form and procedure defined by the Commission.

Coming out of the necessity to protect investors, in addition to disclosure of information, documents and reports, the Commission may require, in the procedure defined by its decision, from certain group of reporting issuers, to furnish any holder of the above-mentioned securities with such information, documents and reports, in accordance with the Clause 3 of this Article.

5. In cases when information, documents and reports as defined by this Article are not applicable for certain groups of issuers, the Commission has the right to require such other information, documents and reports of equivalent character that are applicable for such issuer or group of issuers.

Article 32. Requirements for Financial Reports

1. The Commission is entitled to set forth, by its decision, requirements for financial reports of reporting issuers, as well as procedures for their compiling and publication.  The procedure for consolidation of financial reports of an issuer and affiliated with the issuer persons is defined by the decision of the Commission.

2. For purposes of carrying out its objectives the Commission is entitled to set forth methods and procedure for auditing of the financial reports of a reporting issuer, and the requirements for auditors who conduct auditing of reporting issuers.

3. The requirements and procedures established by the Commission in conformity with Clause 1 of this Law shall not contradict to the financial reporting requirements set forth by the statute for the certain type or group of issuers.

If any other body enjoys the authority (other than accounting standards and rules defined for common application) defined by this Article and prescribed to it by laws, over any class of reporting issuers, the financial reporting requirements for such class of reporting issuers and procedure for their disclosure shall be set forth by the decision adopted jointly by such body and the Commission.

Article 33. Accounting of Transactions and Assets of Reporting Issuers

1. Every reporting issuer shall compile and maintain accounting and record books, which in necessary detail accurately and fairly reflect the transactions and the use and alienation of the assets of the issuer.

2. Every reporting issuer shall devise and maintain a system of internal accounting and controlling, which provides assurance that:

a) transactions are executed in accordance with management’s general or specific authorization (permission);
b) transactions are recorded as necessary:
(1) to permit preparation of financial statements in accordance with  requirements and methods set forth by laws and normative legal acts; and
(2) to maintain proper record books for assets;

c) access to assets is permitted only in accordance with management’s general or specific permission; and
d) the record books for assets, books and accounts are periodically compared with the existing assets (through inventorying or otherwise), and appropriate measures are taken with respect to any differences.

Article 34.  Statement on Major Acquisitions

1. Any person, who in the result of one or more transactions becomes the beneficial owner of any class of equity securities of the issuer, within 10 days after such acquisition shall send, by registered mail, a statement to the issuer of the security and the exchange where the securities are traded (using the address where the latter is located), and file the statement with the Commission pursuant to requirements set forth by Article 36 of this Law.

In case when there is any material change in the information contained in the statement, the person shall, within 10 days after knowing of such change or after he could have known of it, file such amendment to the statement with the issuer, the stock exchange and the Commission, in the procedure defined by the decision of the latter.

2. The requirement set forth by Clause 1 of this Article shall not applied to:

a) any acquisition or offer to acquire securities made by means of the registration statement under Chapter II of this Law;
b) any acquisition of the security by the ownership right, which, together with all other acquisitions by the same person of the securities of the same class during the preceding 12 months do not exceed the 2% of the securities of that class.

3. When persons have agreement (written or oral) to act jointly for purposes of acquiring, holding or disposing of securities of an issuer, for purposes of this Article are deemed as one person, and securities of such class acquired by each of them shall be united for determining their percentage in the total amount of securities of that class.

Article 35. Information required in Statement on Major Acquisition

1. The statement  defined in Article 34 of this Law shall include:

a) information about the person who has acquired securities, and identity, activity and citizenship of the persons acting jointly with him/her;
b) information about the amount and the source (own, loaned etc.) of the funds used for the acquisition of the security;
c) information on the amount of the beneficially owned securities of the person who has made the acquisition and persons acting jointly with him/her, the amount of any other security of the issuer the acquisition of which is reserved to the above-mentioned persons by the power of a contract, and the type of their ownership of such securities;
d) information as to any contracts, arrangements or agreements with any persons with respect to any securities of the issuer, the purchaser of which, and/or the persons acting jointly with him/her is its party;
e) a clear notice about the below-listed, if the purpose of the acquisition is:
- to receive control over the issuer’s activity;
- to liquidate the issuer and to sell its assets (or the significant part of its assets);
- to merge or otherwise reorganize the issuer with another person, or
- to initiate other significant changes in the issuer’s activity or organizational structure.

2. The form and the procedure for signing of the statement provided in this Article shall be established by decisions of the Commission.

3. The Commission is authorized to define, by its decision, additional information and documents subject to inclusion in the registration statement in connection with the purchase of the securities issued by the issuer, and separate forms and procedures for such registration statements.

Article 36.  Declaration of Securities of Managers and Major Shareholders

1. Every person, who:

a) in the result of one or more transactions becomes the  major shareholder of the equity securities of the issuer, and
b) is the Board (or any other such body) member, the executive director (or member of the executive body), member of the supervisory body or any other official person of the reporting issuer (supervisor or advisor of the subdivision), shall file, at the time of the registration of such security on an exchange or by the effective date of a registration statement filed with the Commission, or within 15 days after he becomes such beneficial owner or holds such a position, a statement with the Commission (and send such statement to the exchange, if the securities are registered with it) that includes:
- information about the identity, activity, position and citizenship of the person;
- the amount of equity securities of the issuer that belong to that person by ownership right.

The Commission shall, by its decision, define the form of the statement defined in this Article.

2. Within 15 days after the end of each month any persons specified in Clause 1 of this Article shall file with the Commission (and the exchange if the securities are registered with it) a statement, which shall specify any changes occurred during such reportable month, and the amount of all equity securities of such issuer of which he is the beneficial owner as of the last day of such month.   If the statement defined in the paragraph above is not filed, it is deemed that no ownership change has occurred.

Article 37.  General Statement of Securities Ownership

1. Every person who is the beneficial owner of more than 10% of any class of any equity security of the reporting issuer, shall send a statement to the issuer in the form and within the periods established by the decision of the Commission and shall file the statement with the Commission, which shall contain information on the following:

a) identity of such owner,  and citizenship, and
b) the amount of the securities beneficially owned by the person.

When there is any material change in the information contained in the statement, the person shall file an amendment to such statement where changes are specified, and file such amendment with the issuer and the Commission, in the form and within the period defined by the decision of the latter.

2. Rules defined under Clause 3, Article 34 of this Law shall apply to the requirement set forth under this Article.

Article 38. Disclosure of Reports

1. The Commission, in the procedure defined by its decisions, shall make the information, documents, reports and statements specified in Articles 31, 34, 35, 36 and 37 of this Law available to the public.

Upon the request of any person the Commission, the exchange and the issuer shall furnish such person with copies of the above-mentioned information, documents, reports and statements, collecting duplication costs.  Such copies shall be provided to the state bodies free of charge.

2. In cases when the stock exchange or the issuer fails to meet the responsibility specified in Clause 1 of this Article, the Commission is entitled to exercise, in court procedure, a penalty for the size of two thousand folds of the base due.  Corresponding officials of the Commission (other than the commissioners) bear disciplinary liability, including removal from his/her position, for failure to perform the responsibility specified in Clause 1 of this Article.

3. When performing its authorities defined in Articles 31, 34, 35, 36 and 37 of this Law, for the purposes of protecting investors’ interests, the Commission shall take actions:

a) to develop a centralized information system for the statements of security holders;
b) to avoid unnecessary duplicative reporting, and to reduce the compliance burden of the requirements set forth by this Law and other legal acts adopted with respect to it.

Article 39.  Filing of Confidential Information

1. If any issuer or any other person, who files any report or statement in accordance with this Chapter (in this Article hereinafter referred to as “the responsible person”), considers any non-material information or document included in such report and statement as confidential (commercial or other type of confidentiality), and is willing to avoid the disclosure of such information, he/she may not include such information in the report or statement by making a special note and submit it to the Commission in a separate reference.  In cases when the confidential information is contained in the document such person may designate it as “Confidential”, reflect its existence in the report or statement and file it only with the Commission.

2. The procedure for filing of such information and document is established by decisions of the Commission.  The Commission shall, by its internal regulations and by taking such other actions, exclude the disclosure of such information and document, until making a decision in accordance with Clause 3 of this Article.

3. Within 20 days after such information or such document is received, the Commission shall, after notice and opportunity for hearing, make a decision to accept or to reject the confidentiality of the information.  If the Commission finds with reasonable grounds that documents or information are material or non-disclosure of such information or such document shall be inconsistent with the protection of investors or fair price formation of the security, it may refuse to consider their confidentiality.

4. Within 3 days after the confidentiality of the information or the document is rejected the responsible person is obliged to file an amendment with the Commission and send it to the stock exchange in the procedure provided under this Chapter.

5. If the procedure and periods specified in Clauses 1, 2 and 4 of this Article and decisions adopted in conformity with this Article are met, such report or statement is considered to be filed in time and in proper order.

If the responsible person does not meet his/her obligations within the period specified by Clause 4 of this Article, the Commission may independently send the information and the document to the stock exchange and the issuer as it is required by this Chapter, which shall not free the responsible person from obligations set forth by the statute.

6. The Commission shall, in any case,  keep confidential the following information:

a) the name of the bank, which has extended credit to the person;
b) information that contains banking secret on bank accounts of such other persons, other than the responsible person;
c) any information deemed to be State secret.

For purposes of ensuring accuracy, the Commission is entitled, by its normative legal acts, to define the list of and description for such additional information, the confidentiality of which is, in any case, assured by the Commission.

7.  In exercising the authority specified by this Article, the Commission shall determine that its action is necessary for protection of investors, fair price formation of securities, and for minimizing the negative consequences of disclosure of commercial and such other confidential information.

Article 40.  Liabilities of Managers towards Security Holders of Reporting Issuers

Any Board member of a reporting company (or any other such body), the executive director (the member of the executive body), the member of the supervisory body or any other official person (managers of or advisors to the subsidiary) shall exercise their rights and perform their official duties contentiously and with proper attention, which under similar conditions would have been used by a person holding similar position in managing of his/her own business, which to their opinion is first of all arising from the interests of the issuer and its securities owners.

  CHAPTER V
PUBLIC TRADING IN SECURITIES

Article 41.  Publicly Traded Securities

1. A publicly traded security is any security, which is registered or required to be registered in conformity with Chapter III of this Law, and any security that is listed on any stock exchange or is traded in such stock exchange in accordance with unlisted trading privileges.

Under this Chapter publicly traded securities with more than one year of redemption period defined under Article 6, a, b and c, and the securities defined under h and i, irrespective of their redemption period, are also deemed to be publicly traded securities.

2. Any materialized security (a security with limited circulation) shall contain a notice specifying that the circulation of the security is limited and it can not be sold (other than exempt securities defined under Article 6) without meeting the requirements specified in the prospectus defined under this Law.

The requirement established by this provision shall not apply to exempt securities defined by Article 6 of this Law.

Article 42. Requirements for Form of Publicly Traded Securities

1. For purposes of protection of investors, natural-flow operation and development of the securities markets, the Commission is entitled to prohibit, by its decision, to issue, sell or offer to sell or purchase, or solicit to buy certain class of publicly traded materialized securities.

2. It is prohibited to issue; sell or offer to sell (buy) or solicit to buy any publicly traded bearer’s security.

3. The brokers and dealers are prohibited to purchase, sell or to offer to purchase or sell and to conclude any other transaction, by his or the clients’ initiative, and the exchanges are prohibited to permit the execution of such transactions in any securities, in violation of decisions adopted in conformity with this Article (normative legal acts).

Any issuer is prohibited to issue, purchase or sell any of its security in violation of decisions adopted in conformity with this Article (normative legal acts).

4. Publicly traded securities are subject to de-materialization (transformation into non-paper format) by the Central Depository and other custodians, prior to their registration in accordance with Chapter III of this Law.

Any person, who is the owner of any security that is subject to de-materialization in accordance with this Article, shall present that security for de-materialization, within 10 days after being informed about de-materialization by the issuer or its authorized person. Otherwise, such security becomes invalid, although all rights and privileges granted by it are reserved and may be exercised after its de-materialization.

Article 43.   Trading on Unregistered Exchanges. Trading Restrictions for Certain Securities

It shall be unlawful for any brokers, dealers and exchanges, by making use of any means of an exchange, to execute or register any transaction in security, unless:

a) such exchange is registered with the Commission as a stock exchange in accordance with this Law, or
b) such exchange is exempted by the Commission from the registration requirement set forth on the bases and in the procedure defined by this Law and decisions of the Commission (normative legal acts) adopted in accordance with it.

Article 44.  Margin Requirements

1. For purposes of preventing abuses of credit and other loaned resources used for transactions in publicly traded securities, the Central Bank of the Republic of Armenia may, by its normative legal acts, limit the volume of any loan extended to purchase (hold) such security (other than an exempted security under Article 6 of this Law), or to hypothecate or arrange for the hypothecation of any security.

2. It shall be unlawful for any brokers, dealers and exchanges, directly or indirectly, to extend (maintain) or arrange for extension or maintenance of any credit or loan to or for any customer on the acquisition or holding of any security in violation of the requirements set forth by normative legal acts of the Central Bank of the Republic of Armenia adopted in conformity with this Law.

The Commission shall control the compliance with the requirements in the procedure set forth under this Law and other decisions adopted in accordance with it.

3. It shall be prohibited for any bank, directly or indirectly, to extend, maintain or arrange for extension or maintenance of any loan or credit to or for any other person on acquisition or carrying any security, in violation of requirements set forth by normative legal acts of the Central Bank of the Republic of Armenia adopted in accordance with Clause 1 of this Article.

The Central Bank of the Republic of Armenia shall control the compliance with the requirements in the procedure set forth under this Law and other normative legal acts adopted in accordance with it.

Article 45. Restrictions on Borrowing or Lending by Brokers (Dealers)

1. The Commission is entitled to define, by its decision, restrictions for hypothecation or arrangement for the hypothecation of any security, which belongs to a broker (dealer) or its customer.

2. Brokers (dealers) are prohibited to execute any transactions in any securities in violation of the restrictions defined by the decision of the Commission adopted in accordance with Clause 1 of this Article.

Article 46. Sales of Securities only through Brokers (Dealers)

1. Except for cases provided in Clause 2 of this Article, sales of any publicly traded securities is permitted only through brokers (dealers) who are licensed in accordance with this Law and decisions (normative legal acts) adopted in accordance with it.

2. Sales of publicly traded securities in violation of Clause 1 of this Article is prohibited, except for:
a) any transactions performed outside the territory of the Republic of Armenia;
b) any private transactions i.e. transactions, the parties of which are known in advance;
c) any transactions related to the exchange of any security of an issuer with other such security of the same issuer or provision of additional securities, if additional fees for such exchange transaction are not envisaged and are not directly or indirectly levied;
d) any privatization transaction, performed in the procedure defined by privatization laws, in any shares that belong to the state by ownership right, other than transactions executed in the stock exchange;
e) any other cases, deemed as necessary for the protection of investors, established by decisions of the Commission.

Article 47. Transactions in Stock Exchange; Time of Transfer of Ownership Right

1. The Commission is entitled to define, by its decision, mandatory conditions and requirements for listing and trading in securities on stock exchanges, which are necessary for the protection of investors and fair price formation of securities.

2. Brokers (dealers) are prohibited to execute any transactions in any publicly traded securities on a stock exchange, in violation of this Law, decisions adopted in accordance with it, and rules of the stock exchange adopted in accordance with them. The stock exchange is prohibited to permit such transactions or not to prosecute such violations.

3. It is prohibited to sell any security, which is traded under listed or unlisted trading privileges on any stock exchange, out of the stock exchange, except for:

a) any private transactions, i.e. any transactions, the parties of which are known in advance;
b) any transactions performed by underwriters within the limits of securities issuance.

This provision shall not prohibit any stock exchange to list and trade in any security that is listed on another stock exchange, or to trade based on trading privileges for unlisted securities in accordance with this Law.

4. If any transactions exempted under Clause 3 of this Article are executed out of the Exchange by or through the broker (dealer), he shall immediately present the price and the description of the transaction to the stock exchange, in the form and procedure defined by the decision of the Commission.  Such information shall be disclosed in the stock exchange.

5. When executing any transaction in any security on a stock exchange, the broker is obliged to submit an application in his name and guarantee, on the agreed date of the settlement of the transaction and in conformity with the rules of the stock exchange, the:

a) payment versus the security (in case of the buy order); or
b) delivery, transfer or otherwise provision of the security to the other party of the transaction (in case of the sell order).

6. Any securities trading contract (the transaction) on a stock exchange is considered to be executed on the moment of accepting the offer (execution of the transaction) made in the stock exchange, orally or in writing, through electronic means or otherwise (under the rules of the stock exchange).  The ownership towards the security is deemed to be transferred on the moment when the security is registered with the Central Depository or the custodian in the name of the purchaser (or the holder).

Article 48. Prohibition of Price Abuses

1. It shall be unlawful for any person for the purpose of creating a picture of an active trading in any publicly traded security, or  for the purpose of creating false, seeming and misleading appearance with respect to the market of any such security:

a) to affect one or more transactions in such security, in the result of which actual transfer of the ownership in the security does not occur, or to execute such other apparent transactions with no intention to cause corresponding legal consequences (false transactions);
b) to enter any order for the sale (purchase)  of such security with the knowledge that an order of substantially the same size, at substantially the same price, and at substantially the same time, for the sale (purchase) of any such security, has been or will be entered by or for the same or different parties, or
c) to spread any information, for the purpose of inducing any person or persons to purchase or sale any such security, which is purchased, sold or offered to be purchased or sold by any other person or persons:
(1) which will cause the price of such security to rise or fall due to the market activities of other person or persons, whose aim is to cause the raising or falling of the price of the security;
(2) which, under the light of the given circumstances, is false or misleading with respect to any material fact, and which he knew or had reasonable grounds to believe was false or misleading;

d) to effect, with one or more other persons, a series of transactions in any such securities, thus creating actually or seemingly active trading, or raising or depressing the price of the security, for the purpose of inducing other persons to sell or buy the security.

2. It is prohibited to effect, with one or more other persons, any series of purchase and/or sale transactions in any security registered on any stock exchange, by using the means of the stock exchange, for purposes of maintaining, fixing or stabilizing the price of such security, in contravention of decisions of the Commission adopted for the purpose of the investors’ protection.

Article 49. Prohibition of Use of Inside information

1. An insider is any person, who due or with respect to his participation in the capital of the issuer, membership and position held in any management body of the issuer, or performance of any other duties or services is in the possession of any inside information.  Every person, who is familiarized with inside information the source of which is apparently one or more insider, is also considered as an insider.

2. It shall be unlawful for any insiders, and any other persons who have received, with direct or indirect intention, inside information from such insiders:

a) to purchase (sell) on their or other persons account any security of the issuer with respect to whom they have received such information;
b) to advise, offer or otherwise induce other person or persons to purchase (sell) any publicly traded security, based on the inside information;
c) to disclose such information to the third person, except when the information is provided to the insider in the usual course and in the usual procedure of performance of his official or business duties, or through mass media.  This provision does not relieve any otherwise responsible person from liabilities for damages caused due to disclosure of any commercial or such other confidential information.

3. Insider information is a non-public information (data) that contains any material fact or information with respect to one or more reporting issuers or their any publicly traded securities.

Any fact or information is material, if a reasonable investor would attach importance to the fact or information in making his/her decision to buy such security.

Any information is non-public, if it has not been disclosed in such a way that will ensure the awareness of the large number of investors.  Disclosure of any information through printed media, radio, TV and other means of mass media (including electronic) is sufficient to consider it public.

Article 50. Prohibited Means

1. The Commission is entitled, as it deems necessary for the protection of investors, to define, by its decisions, any such actions, which shall be prohibited and prosecuted in accordance with Articles 48 and 49, and Clause 2 of this Article.

2. It is prohibited to apply or use any fraud or deceptive devices with respect to any purchase and sale of any security, in violation of decisions (normative legal acts) adopted in accordance with Clause 1 of this Article.  Any such violations generate liabilities defined by the statute.

Article 51. Mandatory Listing of Securities

For purposes of protection of investors, the Commission is entitled, by its decisions, to define mandatory listing requirement on any stock exchange for any securities of reporting issuers that meets certain conditions and criteria.
 

CHAPTER VI
PROXIES; TENDER OFFER

Article 52. Use of Proxy Statement

1. For purposes of protection of the investors, the Commission is entitled to establish by its decision additional requirements and procedures for the use of proxy statements by owners of publicly traded equity securities.

2. Every person, who offers the owners of any publicly traded equity security to vote by a proxy statement, or otherwise induces them to vote in such procedure, and requests for the right or authorization to vote, or offers to vote in favor of or against a certain matter, shall meet the requirements and procedure set forth by the decision of the Commission.

3. Every custodian, who holds any publicly traded equity security on the account of its any client, in accordance with decisions of the Commission with respect to transactions  in such securities as prescribed by Clause 2 of this Article, shall;

a) provide the list of the securities owners to any person who has initiated such action, or
b) provide (distribute) the information and documents addressed to the owners at the request of the given person.  The person has initiated the actions under Clause 1 of this Article shall cover the costs associated with the delivery (distribution).

4. It shall be prohibited to offer the owners of publicly traded securities to vote by proxy statements, or to induce them to vote otherwise in such order; and to request for the right or authorization to vote, and to misrepresent (omit), with direct or indirect intention, any material fact from any information and documents, which are presented (distributed) to the owners of publicly traded securities with respect to an offer to vote in favor of or against a certain matter.

Article 53.  Tender Offer

1. A tender offer is a public offer to purchase any substantial part of the publicly traded equity securities, based on which the person or persons (the purchaser) who is making the offer proposes that the owners of such class of securities alienate 10 and more percent of their securities to the purchaser, at the price higher than the market price.

If the publicly traded security is not listed in the stock exchange or in not traded in accordance with trading privileges for unlisted securities, then the price for such security is determined by an independent appraiser (auditor).

2. It is prohibited to make a tender offer for one or more classes of equity securities, without meeting the following rules:

a) such person, as of the date of publishing such offer (including other additional materials) in media, or delivering or otherwise providing the offer to the securities owners, shall file with the Commission a statement, which contains the information defined under Article 35 of this Law.  All advertising and other materials that are published or provided parallel to the offer shall be filed along with the statement envisaged under this Sub-clause and shall constitute its part;
b) such offer has to be disclosed in a procedure or periodicity established by decisions of the Commission, in a newspaper with a circulation of at least 1000 copies, or has to be provided to the owners of the securities, and
c) such offer, and other materials, disclosed or delivered to the owners of the securities, shall contain information subject to inclusion in the statement, in compliance with the decision of the Commission.

3. Any additional announcements and other such advertisement materials, which are published or provided after the disclosure of the tender offer shall contain information and provisions established by decisions of the Commission, and shall be filed with the Commission prior to the date of their publication or provision.

4. Any offers, announcements, statements, information, advertising and other materials (hereinafter referred to as “the announcements’) under this Article shall also be submitted to the issuer, no later than on the date of their publication.

5. Any public offer or advice to accept or reject the tender offer of securities shall be executed in conformity with the decisions of the Commission.

6. It is prohibited to misrepresent (omit), with direct or indirect intention, any material fact from any announcement, published or provided in accordance with this Article, with respect to any securities tender offer.

7. During the securities tender offer, it shall be unlawful for any persons who have made the offer:

a) to purchase or to offer to purchase any security, which is the subject of the tender offer (or any security subject to be exchanged with such securities), otherwise or through other means than it is foreseen in the tender offer;

b) to sell any security of the issuer, which is the subject of the tender offer, or which may be exchanged with such security.  This provision does not limit the compensation offered to the owners of the securities by the tender offer or the possibility to convert part of it with the securities of another issuer or with other class of securities of the same issuer.

Article 54.  Tender Offer Conditions and Changes Thereto

1. Tender offer conditions shall be the same for all the owners of the securities of the same class.  If any announcements with respect to the tender offer are provided to the securities owners, all such owners of securities of the same class shall receive the same announcements.

2. Any person who has accepted the tender offer of the securities, has the right to withdraw his acceptance at any time between the date of the publication of the tender offer (or the change thereto) and the closing date.

3. If any person changes one or more conditions of the tender offer, prior to its closing date, by offering to increase the size of the compensation suggested to the securities owners, such person shall pay the increased size of the compensation against all offered securities (or pay the difference, if the minimum compensation is already paid) regardless of the fact whether the security was offered and accepted prior to the announcement of the change).

Article 55. Acceptance of Greater Number of Securities than it was envisaged by Tender Offer

1. If any person has made a tender offer for a part of any class of security, and if within the effective date of such offer (between the date when the offer is published or provided till the closing date of the offer) the actual number of offered securities is greater than it was envisaged by the tender offer, the securities shall be accepted proportionally, according to the number of securities offered by each owner.

2. The requirements set forth by Clause 1 of this Article shall also applied to such securities that are offered within the effective period for provision of changes stipulated in Clause 3, Article 54 of this Law.

Article 56.   Exempt Transactions.  Procedure for Unification of Persons

1. Requirements set forth under Articles 53, 54 and 55 shall not apply to transactions in securities exempt under Article 6 of this Law.

2. Under Articles 53, 54, 55 and 57 of this Law, all persons who, for purposes of acquiring, holding or disposing any of the securities of an issuer, have agreed (orally, or in writing) to act jointly, for purposes of this Law are considered as “a person”, and securities of the same class acquired by each of them shall be unified in order to determine their percentage in all securities of such class.

Article 57. Tender Offer in Case of Controlling Package

Any person, who in the result of one or more transactions becomes the owner of more than 75% of the same class of equity securities of the reporting issuer, shall, within 60 days after the acquisition, make a tender offer for the securities of that class, if the issuer applies to the Commission to terminate its reporting status in accordance with Article 24 of the Law.

CHAPTER VII
PROFESSIONAL PARTICIPANTS OF SECURITIES MARKET GENERAL PROVISIONS

§1. Professional Qualification

Article 58. Professional Qualification Requirements

1. Any physical persons who have not received professional qualification in accordance with decisions of the Commission (hereinafter referred to as “the professional qualification” or “the qualification”), are prohibited to act in the name of, or as a part of a professional persons, or otherwise perform any professional activity, or to offer to perform such activities for other persons, and to hold the position of the executive director of such person.

2. Any professional qualification is granted based upon a corresponding written (on computer) examination held by the Commission.  The Commission develops questions and defines periodicity of the examinations.

The Commission may delegate such authority to one or more self-regulatory organizations.

3. Any physical person has the right to take the qualification examination, if he meets the following requirements:

a) he has not been convicted for intentionally committed crime or economic crime committed out of disregard, within three years prior to the submission date of the application for qualification, and
b) he has not been deprived of professional qualification on the bases defined under Article 59 of this Law, within one year prior to the submission of the application for qualification;
c) he has paid state dues defined by laws.

Article 59. Deprivation of Professional Qualification; Permanency of Qualification

1. The Commission, after notice and opportunity for hearing, is entitled to deprive the persons from professional qualification, if:

a) such person after receiving the qualification is convicted for intentionally committed crime or economic crime committed out of disregard;
b) such person has been deprived, by an exchange or a self-regulatory organization, from the right to execute transactions on the exchange, in the composition of the staff of the professional person or on his behalf, or he has been deprived from the membership of such organization for violating, or has acted in violation of this Law, decisions (normative legal acts)  adopted in accordance with it and rules of the exchange or the self-regulatory organization;
c) such person, regularly or with obvious bad-faith has violated (has not performed) or continues to violate (not to perform) requirements of this Law and the decisions adopted in accordance with this Law;

2. Any person’s qualification is permanent and he may be deprived from such qualification solely on the bases provided under this Law.

§2.  Professional Activity in the Securities Market

Article 60. Professional Participants of Securities Market

1. Persons who perform professional activities in the securities market are the brokerage (dealer) companies, the trust managers of securities, the custodians and other persons defined by the statute (hereinafter referred to as “the professional participants”).  Only juridical persons may be professional participants, if otherwise is not provided by the statute.

2. Professional persons have the right, and in cases established by the decision of the Commission, are obliged to use the titles specified under Clause 1 of this Article in their names.

Article 61. Professional Activity; Licensing Requirement

1. Professional activity in securities market is such activity that is subject to licensing pursuant to Chapters VII and VIII of this Law and decisions (normative legal acts) of the Commission adopted in accordance with it.

2. Without the license for professional activity, it is prohibited:

a) to perform or offer to perform any professional activity in the securities market or to represent himself as a person performing such activity;
b) to use the names of professional persons specified under Article 60, Clause 1 of this Law in the name or advertising materials of such persons, for purposes of describing or characterizing his own activities, excluding cases when the meaning of the used name apparently indicates that it does not refer to the professional activity in the securities market.

3. The Commission, pursuant to this Law and decisions adopted in accordance with it, grants licenses for separate professional activities in the securities market.

4. Performance of more than one type of professional activities in the securities market is permitted in case of having a license for each activity, if otherwise is not defined by this Law.

5. Licenses for professional activities are granted without any time limits.  Any licenses or rights and privileges granted by them shall not be transferred or otherwise disposed.  The Commission shall establish the form for such licenses.

Article 62. Application for License

1. In order to receive a license for any professional activity, an application shall by filed with the Commission, which shall include, as established by decisions  of the Commission, the following information:

a) the persons’ identity and location (address);
b) information about any persons who are members of the Board (or such other body), executive director (members of executive body), members of the Supervisory body or other supervisory  (head of the subdivision or advisor) of a person; or persons who, directly or indirectly, own more than 5% of the equity securities of any class of such person;
c) information about any persons, whose any class of equity securities belongs, directly or indirectly, to such person;
d) professional qualification of such persons, who will be in the structure of any person or perform professional activities in the name of such person, or will hold the position of an executive director;
e) the capital and financial indices of such person;
f) the space allocated for the performance of the activities, its conditions and equipment.

2. The below listed documents shall be attached to the application:

a) the Charter of the person and a copy of the state registration certificate;
b) the receipt for payment of the State due.

3. Any application (and further amendments thereto) is considered to be filed with the Commission on the date when it is received by the Commission, but no sooner than the date when the receipt for the payment of the State due is received.

4. It is prohibited to misrepresent (omit) any material fact in the application for the license or in any other documents attached thereto, and it serves as sufficient bases for rejection or revocation of the license.

Article 63. Issuance of License

1. Notwithstanding cases envisaged by Clause 2 of this Article, any application for the license is considered to be satisfied on the 30th date of its filing, if the Commission has not satisfied it before that date.

If any amendment (or any other document attached thereto) is submitted to the Commission prior to the date of satisfaction of the application, such application is considered to be filed with the Commission on the date when the amendment is submitted, except when such amendment is submitted with the consent or assignment of the Commission granted prior to the date of satisfying the application.

The Commission shall issue the license within 3 days after the application is satisfied.

2. Prior to satisfying the application, the Commission, after notice and opportunity for hearing, issues a decision  in which it rejects to satisfy the application for licensing, and specifies the bases for the rejection, if:

a) the information and documents required in the application are incomplete, or any material fact(s) contained therein is misrepresented (omitted);
b) there is any inconsistency or any other basis for rejection as provided under this Law or other normative legal acts that are adopted in accordance with it, or
c) within one year prior to the submission date of the application, the license of such person was revoked on the bases provided under Article 64 of this Law.

3. After the application is satisfied, if any changes occur in the information contained in the application, the professional person shall file such relevant addition with the Commission, within 15 days after he has learnt about it, except for cases that the Commission shall define as exempted by its decision.

Article 64.  Suspension, Revocation and Cancellation of Licenses; Reinstatement of Lost License

1. After notice and opportunity for hearing the Commission suspends, by its decision,  the license of the professional person  specifying the bases for suspension and requiring  to eliminate and/or not to allow them in the future, if

a) for violating or acted in violation of this Law and decisions ( normative legal acts)  adopted in accordance with it and rules of the Exchange or other self-regulatory organization, the exchange or the self-regulatory organization has suspended, for a period of not exceeding 60 days, the person’s right to affect transactions in the exchange and his membership to the organization, until such right or membership is reinstated;
b) such person, regularly or with obvious bad-faith and disregard, has:

- violated or is acting in violation of this Law and requirements defined by decisions (normative legal acts)  adopted in accordance with this Law, or
- not performed or is continuing not to perform the order issued by the decision of  the Commission, within the frame of its authority.

Under this Clause, the license may not be suspended for more than 30 days.

2. The Commission has the right, by its decision and after notice and opportunity for hearing, to issue an order to revoke the license of the professional person by specifying the bases for such revocation, if the person has not performed or is continuing not to perform the instruction given by the decision that is issued in accordance with Clause 1 of this Article.

3. Any decision on the cancellation or revocation of the license shall be provided to the professional person within 3 days after the decision is made.  A revoked license is subject to be returned within the possible shortest period of time.

4. Any license is cancelled upon liquidation of, jointing to or merging of the professional person with any other person, and in cases, when such professional person has not performed professional activity for 24 months.

5. In cases when a license is lost, it is reinstated in the same number, on the same date and within the same conditions by which the previous license was issued.  Losing of the license does not generate any other consequences.
 

§ 3. Regulation and Supervision of Professional Activity

Article 65. Regulation and Supervision of Activity of Professional Persons

1. The Commission is entitled to define, by its decision, rules on the part of the persons’ activity that will assure the enforcement of the requirements of this Law, including minimum and maximum net capital requirements (economic norms) defined under this Law.

2. The Commission has the right to supervise the activity of professional persons.

Professional persons are obliged to file reports with the Commission.  The Commission shall establish the form, content and submission procedure for such reports in conformity with this Law and decisions (normative legal acts) adopted pursuant to it.

The Commission is entitled to conduct inspection of activity of professional persons in the procedure defined by this Law and decisions (normative legal acts) adopted in compliance with it.  During the inspection of the Commission any professional participant is obliged to provide all the accounting documents specified under Article 66 of this Law, and the contrary shall serve as grounds for revocation of the license.

Article 66.  Accounting and Reports of Professional Persons

1. Every professional person shall compile and maintain accounting, registration and record books to accurately and completely reflect, in necessary details, the use and disposition of its transactions and assets.  The requirements set forth under Article 33 of this Law shall be applied to any professional person.  The Commission shall define requirements for professional persons in accordance with rules provided under Article 32 of this Law.

2. Every professional person shall file with the Commission, in the specified form, procedure and periods, current reports on any persons, who act in their structure (or on their behalf) based on professional qualifications, and any of its participants, including quarterly reports as defined by decisions of the Commission and annual financial statements, certified by an independent auditor.
 
3. The form for submission of such reports shall be defined by the decision of the Commission.  The Commission shall, by internal regulations and by taking other measures, exclude the disclosure of such reports, except for financial statements and other information defined by this Law.

4. The Commission is entitled to define separate accounting requirements, reporting forms and filing procedure for every type of professional persons or for persons performing more than one professional activity.

Article 67.  Net Capital Requirements for Professional Persons

1. The Commission has the right, by its decisions, to define mandatory capital requirements for the activity of professional persons or for separate transactions:

a) the minimum size of the own capital of the professional person;
b) the maximum size of the loan provided to the professional person’s client or affiliated with it person for purposes of acquiring securities;
c) maximum size of the ratio of the aggregate of loans provided to the professional person and affiliated with it persons, warranties and guarantees against their liabilities and the capital of the professional person,

2. The same sizes of net capital requirements are defined for persons that are performing the same type and volume of activity.  For persons that perform more than one type of activities, the size of the net capital requirement established for each type of activity that is stricter shall be applied.

The Commission, by its legal normative acts, defines sizes of net capital requirements and procedure for their calculation, including composition of absolute values (modules).

Notwithstanding cases defined under this Law, any decision on determining stricter net capital requirements, becomes effective not later than on the 180th day of its approval by the Commission.

3. For purposes of ensuring the general stability and liquidity of the securities market and only in extreme situations, the Commission has the authority to prescribe special net capital requirements, the effective periods of which may not exceed 6 months. Any special net capital requirement automatically ceases its effectiveness on the date of completion of the effective date of such requirement.

The special economic requirements become effective within such periods defined by the Commission as sufficient timing for professional participants to bring their activities into consistency with such special net capital requirements.
 

§ 4. Official Information

Article 68.  Official Information

1. Under this Law official information shall include: any information related to a customer’s account that has been obtained by the professional person (also including the Central Depository) in the course of servicing its customer and transactions executed on the assignment or in favor of the customer, as well as any information deemed commercial or official secret of the customer, and any information related to the customer’s activity plan, design, invention, utility model or industrial design and any other such information, which the customer has intended to keep secret and the professional person was or should  have been aware of such intention.

2. Any information about customers, which is provided by the professional persons to the Commission in connection with the supervision of the professional persons, defined under the first paragraph of this Article is deemed to be official information.

Article 69.  Disclosure of Official Information

1. Notwithstanding cases defined under Clause 2 of this Article, it shall be unlawful for any person, organization, state body or official to disclose any official information, which it was confided in or aware of or provided to in the course of its official or business activity.  The professional person, its manager or official shall reject any intercession or request to provide any official information, if it is not submitted in conformity with the provisions of this Law.

Disclosure of official information is any publication or distribution of such information (or any of its carriers), in writing or orally, through mass media or otherwise, or any attempt to make such information available to a third person(s), or a direct or indirect provision of any opportunity to a third person(s) to obtain such information (to permit, not to hinder or, in the result of violation of the procedure on keeping such information, to make possible the disclosure of such information).

2. The following shall not be deemed to be disclosure of official information and shall not be prohibited under Clause 1 of this Article:

a) provision or disclosure of any information by the professional person to any persons or organizations that render legal, accounting and other representative services to such professional person or, who perform certain activity for such professional person, if such provision or disclosure is required in order to render the services or to perform the works, and if such persons or organizations have provided a written commitment to keep such information and to abstain from its disclosure;

b) disclosure of information related only to the customer of the professional person, if such disclosure was made by the customer or by his written or verbal permission granted in the court;

c) provision of official information to the Commission in the course of conducting its supervision of the professional persons’ activity.  During the supervision of the professional person the Commission has the right to receive and become familiarized with the information concerning the customers of the profession person,  if such information is required for valuation or supervision of credits and other investments, and assets;

d) provision of official information in conformity with the requirements set forth by the Civil Procedure Code of the Republic of Armenia and the Criminal Procedure Code of the Republic of Armenia.

Article 70.   Responsibility to Keep Official Information

1. Professional persons shall keep official information in conformity with Clauses 2 and 3 of this Article.

2. Managers, officials, former managers and officials of professional persons, as well as persons and organizations that are rendering or have rendered services or are performing or have performed work for such professional persons are prohibited to disclose official information confided in or known to them in the course of their service or work, and to use such information coming out of their or the third person’s (or persons’) interests or to provide a direct or indirect opportunity to the third person(s) to use such information (to permit, not to hinder or to make the use of such information possible in the result of the violation of the procedure defined for keeping of such information).

3. Professional persons shall take such technical measures and define such organizational rules that are necessary to ensure the proper keeping of official information.

Article 71.  Provision of Official Information

1. Provision of official information, in cases and on bases defined under this Law, is the verbal or the written disclosure of such information to state bodies, officials and citizens.

2. Any person (other than the professional person), who has been confided to or aware of any official information in the course of their service or work, shall not provide such information to any other persons.  Provision of any official information that the Commission has learnt about the customers of the professional persons in the course of the supervision of the professional person shall be made only in conformity with Clause 1 of this Article.

Article 72.  Provision of Official Information on Civil and Criminal Cases

1. Professional persons shall submit official information required for civil cases only on the basis of the court decision made in the procedure defined by the Civil Procedure Code of the Republic of Armenia.  The decision shall specify the person and the information subject to disclosure.

2. Official information on criminal cases shall be regulated by the Criminal Procedure Code of the Republic of Armenia.

3. It is prohibited to provide any official information, based on the decision defined by Clause 1 of this Article, about other persons not specified in that decision.

Article 73.  Provision of Official information to Heirs (Legal Successors) of Customers

Provision of official information by the professional person to the heirs (legal successors) of the customer shall be performed in the procedure defined by the Civil Code of the Republic of Armenia.
 

CHAPTER VIII
PROFESSIONAL PARTICIPANTS OF SECURITIES MARKET SPECIAL PROVISIONS

§ 1. Brokerage (Dealer) Companies

Article 74. Brokers and Dealers; Brokerage (Dealer) Company

1. A broker is a person, who is engaged in the business of executing transactions in securities (based on an assignment, commission, agent contract or otherwise) on the account of others and in the structure, name or otherwise of the brokerage company (brokerage activity).

2. A dealer is a person, who is engaged in trading in securities on his account (dealer’s activity), but does not include banks or persons who are buying or selling securities as a part of their main activity.

3. A brokerage (a dealer) activity is subject to licensing as professional activity.  Any broker (dealer) may perform brokerage (dealer) activity only in the structure or on behalf of brokerage (dealer) company.

4. Any brokerage (dealer) company is a juridical person, which acts based on the license issued for brokerage (dealer) activity defined under this Law.

Article 75. Brokers’ (Dealers’) Transactions; Limitations

1. Any broker (dealer) is obliged, by meeting the requirements set forth under this Law and decisions (normative legal acts) adopted in accordance with it, to act in the structure or on behalf of a brokerage company and based on its license;

a) to accept securities purchase or sale orders of its clients and to transmit or execute such transactions on the account and means of the client;
b) to manage the securities portfolio of its client and the funds envisaged to be invested in securities, and to perform securities trust management activity, if the brokerage company has a separate license to perform such activity;
c) to perform dealer activity;
d) to extend and receive loans in securities, and to purchase securities for the client on his own account, and to execute short sales in accordance with decisions  of the Commission;
e) to organize and/or perform unwarranted distribution of an issuer’ securities;
f) to organize and/or perform warranted distribution of an issuer’s securities;
g) to advise, as regard to distribution, the issuer on securities issuance and attraction of funds in securities;
h) to advise his clients on matters related to investments, including securities prices, investments in securities, securities purchase and sale.

2. Any dealer, by meeting the requirements defined by this Law and decisions (normative legal acts) adopted in accordance with it, shall act in the structure or on behalf of any dealers’ company, and perform, based on the license, solely the transactions provided under Sub-clauses c, e, f and g, Clause 1 of this Article.

3. Except for cases provided under Clause 1 of this Article, any brokerage (dealer) company has the right, upon meeting the requirements set forth by this Law and decisions (normative legal acts adopted) adopted in accordance with it, to perform custodial activities, provided that the brokerage (dealer) company has a separate license to perform such an activity.

4. It shall be unlawful for any broker (dealer) to execute transactions provided under this Article otherwise than it is defined therein, and to act, without a corresponding authorization, in the structure or on behalf of such brokerage (dealer) company.  This limitation serves as a basis for revocation of the license.

5. The Commission is entitled, by its decision, to permit any brokerage (dealer) companies to be engaged in such other types of activities, which are closely related to the activity provided under this Article, and to establish additional requirements deemed as necessary for the performance of such activity.

It shall be unlawful for any brokerage (dealer) companies, brokers and dealers to perform any activity not defined by this Article, if otherwise is not set forth by normative legal acts of the Commission.  Any violation of such limitation shall serve as a basis for revocation of the professional qualification.

Article 76. Requirements for Brokerage (Dealer) Companies

1. Any person may receive a license for a brokerage (dealer) activity, if it is organized as a partnership or a company.

2. Any brokerage (dealer) company is obliged to define rules for regulation of brokerage (dealer) transactions, which shall be in conformity with the requirements set forth by the decision of the Commission.

3. Any brokerage (dealer) company shall have a supervisory department (service) for the supervision of the brokers’ (dealers’) activities, the functions of which shall be defined by the decision of the Commission. Such service shall inform the Commission of any violations or misconduct discovered in the activity of the brokerage (dealers) company within 5 business days after such violation or misconduct is discovered.

4. I unlawful for any brokerage (dealer) company to permit any person, who does not have such corresponding qualification, to render any brokerage (dealer) services to any customer.  This provision does not limit the involvement, for purposes of convenience, of any staff members without professional qualification in such service of the customer.

5. It shall be unlawful for any persons, who do not have the right to take professional qualification examination on the bases of Clause 3 a and b of Article 58, to be the Board member, or the member of any other body with such authorities, of any brokerage (dealer) company.  It shall be unlawful for any person, who does not have a professional qualification, to be the executive director, or any other official with such responsibility, of any brokerage (dealer) company.

6. The Commission, by its decisions, as it deems necessary for the protection of investors, has the right to define additional requirements for brokerage (dealer) activities, including mandatory requirements for SRO membership.

7. Any violations of Clauses 3 and 4 of this Article serve as basis for revocation of the license and deprivation of professional qualification.

Article 77.  Activity and Participation only in One Brokerage Company

1. It is prohibited for one and the same person to perform, directly or indirectly, any activity defined under Clauses 1 and 3, Article 75 of this Law, in the structure or in the name of more than one brokerage company.

2. It is prohibited for one and the same person to, directly or indirectly, participate in more than one brokerage (dealer) company.  If any person becomes a participant in more than one brokerage (dealer) company, he shall immediately inform in writing the Commission about it and shall take measures to terminate his participation in more than one such company.

This limitation and requirements do not apply to such cases of participation in such brokerage (dealer) companies that are reporting issuers under this Law and have more than 500 equity shareholders.

3. Any violation of the requirements set forth under this Article serves as basis for deprivation of a professional qualification.

Article 78. Contract on Brokerage (Dealer) Services

1. The customer may unilaterally terminate any contract on brokerage (dealer) services on condition that the broker (dealer) is informed about it for at least 10 days of advance notice.  Within 3 business days after the termination of the contract, the broker shall transfer to the customer or his representative all the securities and cash funds, which belong to the customer.  The contract shall not limit the right defined under this provision.

For purposes of assuring the protection of investors, the Commission is entitled to establish other mandatory requirements for such contracts, and it shall be obligatory for any broker to include such requirements in the contract.

2. Any brokerage company and any person acting in its structure or in its name based on the professional qualification is obliged to duly perform assignments of his clients, and exercise the rights of clients assigned to him by the contract coming out of the interests of the client (fiduciary responsibilities).  Within its fiduciary responsibilities any trust manager shall reveal the extent to which his customer is willing and capable to bear investment risk, based on the information and statements provided by the latter.

3. Any brokerage company and any person acting in its structure or on its name based on the professional qualification is obliged to execute his client’s assignments following the sequence in which they are received.  When executing transactions on behalf and account of brokerage company, transactions that are concluded based on the assignments of clients are subject to priority performance.

4. In cases of existing or possible conflicts of interests between any brokerage company (or any person acting within its structure or on its name) and its client or between different clients of the brokerage company, and the parties were not aware of such conflicts in advance, and if such conflicts result in actions by the brokerage company that cause damage to the client’s interest, or if the brokerage company acts unconscientiously in matter related to customers’ interests, he shall indemnify any damage caused to the client, in conformity with the procedure defined by the statute and other legal acts.

The brokerage company and any person acting within its structure or on its name based on the professional qualification shall immediately inform the Commission of any existing or possible conflict of interests between the client and itself.

5. Any broker shall maintain segregate accounts for every client and for his and the clients’ securities and cash funds.

6. Any securities and cash funds of the client held with the brokerage company, and profits generated from their use shall not be pledged as collateral or confiscated against the broker’s debts without the consent of the client.

In cases of bankruptcy or insolvency of the brokerage company any securities under its management, cash funds and profits generated in the result of their management shall be segregated from its inventory and returned to the customer at his/her first request.

The Commission is entitled to define mandatory rules for purposes of ensuring the protection of customers’ rights that are set forth under this Clause.

Article 79. Provision of Reports to Clients; Disclosure of Transactions

1. Every brokerage (dealer) company shall provide a copy of annual financial statements, approved by an independent auditor, to his clients in the procedure defined by the Commission.

2. Every brokerage (dealer) company and broker (dealer) shall furnish their clients with any reports defined by decisions of the Commission and rules of self-regulatory organization, in the established form and procedure.

3. Every brokerage (dealer) company shall disclose any information, defined by decisions of the Commission, on any transactions executed or offered by it, including securities quotations made by such company.  Disclosure of identity of the other party of the transaction may not be required.

The Commission shall, by its decision, define the form, procedure and means for disclosure of such information.
 

§ 2. Trust Managers of Securities

Article 80. Trust Management of Securities and the Trust Manager

1. Any securities, funds marked for investments in securities, assets and funds received in the result of trust management of securities belonging to another person and placed in holding of a juridical person, carried out in the name and on the account of such person (beneficial) or any other person designated by the owner constitute trust management of securities (hereinafter referred to as “the trust management”).  The trust management activity is subject to licensing.

2. A trust manager (hereinafter also referred to as “the manager”) is a juridical person licensed by the Commission to conduct the trust management activity.

Article 81. Requirements for Trust Managers

1. Any trust manager shall define rules of regulations for trust management activity, which shall be in conformity with requirements set forth by decisions of the Commission.

2. Any trust manager shall have a supervisory service, which shall supervise the manager’s activity, whose functions are defined by the decision of the Commission.  The supervisory service shall inform the Commission about any violations or misconduct discovered in the activity of the manager, within 5 business days after such violation or misconduct is discovered.  Any violation of the requirement under Clause 1 of this Article serves as basis for revocation of the license.

3. It shall be unlawful for any persons, who do not have the right to take professional qualification examination on the bases of Clause 3 a and b of Article 58, to be the Board member of the trust manager, or the member of any other body with such authorities.  It shall be unlawful for any person, who does not have a professional qualification, to be the executive director of the trust manager, or any other person with such responsibility.

4. It is prohibited for any trust manager to perform any activity not related to trust management activity, other than activities permitted for brokerage companies and custodians.

Article 82. Trust Management Contract

1. The trust management contract shall include a provision on the client’s right of unilateral termination of the contract upon notice to the trust manager at least ten  (10) days prior to the date when the termination becomes effective.  Upon termination, the trust manager shall, within three (3) days, transfer the securities and cash funds of the client to the client or his/her designee.

For purposes of assuring protection of investors, the Commission is entitled to establish other mandatory requirements for trust management contracts, and it shall be the duty of any manager to include such requirements in a contract.

2. The manager is obliged to duly perform any assignments of his clients and exercise the securities ownership rights assigned to him by the contract based on fiduciary interests (fiduciary obligations) of its client.  Within his fiduciary obligations, the trust manager is obliged to clarify, based on the information and statements provided by the client, the extent to which the client is willing and shall be able to bear the investment risk.

It shall be unlawful for any manager to transfer (delegate) the execution of his contractual obligations to other persons, without a written agreement of the client.

3. The manager shall separate and maintain segregate accounts for his and his clients’ securities and cash funds in the procedure defined by the statute and the decision of the Commission.

4. Any securities held by the manager shall not be hypothecated or confiscated against any debts of the trust manager.

Upon the bankruptcy or insolvency of the manager, any securities, cash funds and profits generated in the result of their trust management shall be separated from the assets of the trust manager, and upon the first request of the client, shall be returned back to the client.

The Commission has the right to establish mandatory rules to ensure the protection of the clients’ rights prescribed under this Provision.

5. In case if any conflict of interest exists between the manager and his client or between different clients of the manager, about which the parties were not aware of in advance, and which results in the actions of the manager that cause damage to the interests of the client, or in cases, when the manager does not act conscientiously with respect to the interests of its clients, the manager shall indemnify the damage caused to the clients on his account in the procedure stipulated by laws and other legal acts.

Article 83. Providing Reports to Clients

1. The manager shall provide annual financial reports certified by an independent auditor to his customers in the procedure and within periods specified by the Commission.

2. The manager shall provide copies of any reports to his clients in the form and procedure defined by the decision of the Commission.

§ 3. Custodians of Securities

Article 84. Securities Custodial Activity

1. Provision of services of safekeeping, custody, and registration and transfer of rights on securities constitutes custodial activity (hereinafter referred to as “the custodial activity’).  Any custodial activity is subject to licensing as a professional activity.

2. Any juridical person, as well as the Central Depository, who has received a license to perform custodial activity, is considered to be a securities custodian.

3. Except for exemptions defined by the decision of the Commission, every custodian is considered as sub-depository of the Central Depository.  The functions of any sub-custodians are exercised in conformity with a contract concluded in accordance with decisions of the Commission.

Article 85. Custodial Services

1. Every custodian, shall, in conformity with decisions  of the Commission, offer by contract the following services to his client;

a) to register the rights and obligations towards the client’s securities;
b) to act as nominee of the client’s securities;
c) to maintain a separate depot account by registering the period and essential conditions for any transactions;
d) to provide the clients with a complete information received from the securities issuer, the Central Depository and such other custodian;
e) to provide information to the client in conformity with the procedure and in cases provided under Article 52 of this Law.

2. The custodian has the right to render additional services to his clients in conformity with decisions of the Commission.

Article 86. Requirements for Custodians

1. Every custodian is obliged to define rules of regulations for the custodial activity, which shall be in conformity with requirements set forth by the decision of the Commission.

2. Every custodian shall have a supervisory service to control the custodian’s activity, the functions of which are defined by the decision of the Commission.  The supervisory service shall inform the Commission about any violations or misconduct discovered in the activity of the custodian, within 5 business days after such violation or misconduct is discovered.  Any violation of the requirement under Clause 1 of this Article serves as basis for revocation of the license.

3. Every custodian, upon filing a licensing application with the Commission, shall:

a) substantiate that his technical equipment and professional preparedness of the staff meets the requirements for rendering custodial services set forth by the decision of the Commission, and
b) substantiate, if otherwise is not defined by decisions of the Commission, that the utilized assets may be jointed with those of the Central Depository, and file the signed agreement with the Central Depository.

4. It shall be unlawful for any persons, who do not have the right to take professional qualification examination on the bases of Clause 3 a and b of Article 58 of this Law, to be the member of the Board of Directors of the custodian, or the member of any other body with such authorities.  Any person, who does not have the professional qualification, shall not be the executive director, or any other person with such responsibility, of the custodian.

5. Custodians are prohibited to perform any activity that is not related to custodial services, with the exception of such activities that are permitted to brokerage companies and trust managers.

Article 87. Custodial Contract

1. A custodial contract may be unilaterally terminated by the client upon 20 days of advance notice to the custodian.  Within 3 days after the termination of the contract, the custodian shall transfer to the client all of his securities and cash fund.  The right defined by this provision shall not be limited by a contract.

2. The custodian is obliged to duly perform his client’s assignments and exercise such rights of the securities ownership, the performance or the exercising of which he has undertaken by the contract.

Article 88. Providing Reports to Clients

1. The custodian is obliged to provide annual financial reports certified by an independent auditor to his customers in the form and procedure specified by the Commission.

2. The custodian is obliged to provide reports to his clients in the form, procedure and periodicity defined by the normative legal acts of the Commission.

CHAPTER IX
SELF-REGULATORY ORGANIZATIONS

§1. General Provisions

Article 89. General Provisions

1. A self-regulatory organization of professional participants (hereinafter referred to as “the self-regulatory organization”) is a volunteer union of professional participants of securities market (the organization), which is a non-commercial juridical person and is registered with the Commission in conformity with the procedure defined by this Law.

2. The aim of the SRO is the establishment of necessary conditions for the efficient operation of its members (including organization of trading), regulation and supervision of their activity, protection of their collective interests, development and enforcement of rules of conduct for its members, as well as accomplishment of the regulatory purposes of this Law.

3. The procedure for the establishment and activity of a SRO is defined by the Civil Code of the Republic of Armenia, this Law, decision (normative legal acts) adopted in accordance with it, and the Charter of the SRO.

4. The name of any SRO shall contain an indication of the main type of its activity or at least one of the components of such activity, and include the “self-regulatory organization” words or “the SRO” abbreviation, if otherwise is not defined by this Law. And the name of the stock exchange shall contain the “stock exchange” words.

5. Any property transferred by the members (founders) of the SRO shall be considered as the property of the SRO.  The SRO shall use such property for purposes established by its rules and for the implementation of interests and tasks of its member.  Members of the SRO shall not be liable for obligations of the SRO.  The SRO shall not be liable for the obligations of its members.  The SRO shall bear liability for any damage caused by it in the result of violations of the requirements set forth by this Law and other legal acts.

6. Any SRO is established on the basis of the right of any professional participant of the securities market to become a member of and to equally participate in the management of the SRO and on “one member- one vote” principle.

Article 90.  Functions of Self-Regulatory Organization

1. Any SRO has the right to:
a) inspect activities of its members’ and persons acting on their behalf and in their structure to assure compliance with the rules of the SRO.  Such control includes the right to examine any books, records and other documents related to any activities in the securities market performed by any members in compliance with the rules and regulations of the SRO;
b) adopt rules and regulations for professional participants of the securities market,  for purposes of assuring proper conditions for their activity, carrying out qualification requirements of members, assuring compliance with standards of professional ethics in the securities market, protection of interests of securities owners and other customers of the members of the SRO, assuring the compliance with and application of net capital and other requirements as defined by this Law and decisions  of the Commission, and promotion of transparent and regulated securities markets;
c) set forth training and other educational requirements for members and other participants to meet the standards of ethical, technical and professional conduct of members;
d) to initiate administrative proceedings against its members and persons acting on behalf or in the structure of such members, and to exercise administrative sanctions (including penalties, which shall be added to the income of the organization) and to suspend or cancel the membership for violations of laws, decisions (normative legal acts) of the Commission  and rules of the SRO;
e) organize trading in securities in cases envisaged by laws and other decision (normative legal acts);
f) settle disputes among its members, by establishing an arbitrage, or otherwise.

2. The self-regulatory organization has the right to exercise other functions permitted by this Law and decisions of the Commission.

Article 91.  Rules of Self-Regulatory Organization

1. Rules of the self-regulatory organization include the Charter of the organization, internal procedures, rules and other legal acts required by the decision of the Commission, which shall be adopted by the general meeting or the Observers’ Council.

2. Rules of the self-regulatory organization and any restatements and amendments thereto, shall become effective on the dated when they are registered with the Commission in conformity with this Law.

3. Members of the self-regulatory organization, persons acting in its structure or in its name and officials of the given organizations are prohibited to act in violation of rules registered with the Commission, and it shall be unlawful for the self-regulatory organization to permit or not to prosecute such violations.

Article 92. Membership to Self-Regulatory Organization

1. The SRO shall have at least 10 members.

2. The rules of the self-regulatory organization shall define that:
a) any certain type of professional participant may become a member of the self-regulatory organization, with the exception of cases stipulated by this provision;
b) each member, and associated with it persons, shall have only one vote at the general meeting of the members of the self-regulatory organization. Within 30 days after discovering the bases for  affiliation, the general meeting of the self-regulatory organization’s members, or any other such body, shall, by its initiative or the initiative of the Commission, consolidate the votes of the affiliated persons (consolidation of votes) by reserving only one voting right;
c) any person shall not be a member of the self-regulatory organization and shall not perform professional activities in its structure or in its name, if:
- such person does not have the license to perform the given professional activity;
- such person, has been deprived from membership to the self-regulatory organization within the year prior to the discussion of the issue of granting membership by the self-regulatory organization;
d) the self-regulatory organization is obliged to supervise, through its corresponding bodies, the activity of its members (and persons acting in their structure or in their name), and in cases of violation of this Law, decisions (normative legal acts) adopted in accordance with it and the rules of the given organization, apply corresponding disciplinary sanctions (including penalties in cash and suspension or termination of the membership), and insure compliance with their requirements;
e) any member, or person acting within its structure or in its name based on the professional qualification, shall, upon having a knowledge of any violation of this Law, decisions (normative legal acts) adopted in accordance with it and the rules of the self-regulatory organization by any such other member, promptly notify the supervisory service of such member about the violation;
f) every members shall make lump-sum or periodic membership fees and payments for using the services rendered by the self-regulatory organization;
g) profit of the self-regulatory organization shall not be distributed, directly or indirectly, in the form of the dividends or otherwise, to its members or other persons as remuneration for their participation, and shall be used solely for the statutory purposes.  This provision does not exclude the opportunity to equally distribute the remaining inventory of the self-regulatory organization to its members, in case of liquidation of the self-regulatory organization.

Article 93. General Meeting of Members of Self-Regulatory Organization

If otherwise is not defined by this Law, the rules of the self-regulatory organization shall define that:
a) the supreme management body of the self-regulatory organization is the general meeting of its members, which implements the management of the self-regulatory organization through calling of annual or extraordinary  meetings;
b) the general meeting of the members has the authority to discuss matters and make decisions, if the two third of voting members are participating at such meeting,  and decisions on any matter under the exclusive authority of the general meeting shall be made by at least the two third of votes of members participating at the meeting, if otherwise is not provided under this Law;
c) matters  under the exclusive authority of the general meeting are;
(1) adoption of appropriate rules of the self-regulatory organization and making changes thereto;
(2) deprivation of the membership to the self-regulatory organization;
(3) election of the chairman and the members and of the Observers’ Council of the members of the self-regulatory organization, the head of the supervisory service and termination of their authorities;
(4) approval of the annual reports on the activities of the self-regulatory organization, including balance sheets and other financial reports;
(5) adoption of the decision on re-organization and liquidation of the self-regulatory organization;
(6) other matters defined by the rules of the self-regulatory organization.

Article 94. Observers’ Council and Executive Body of Self-Regulatory Organization

1. The rules of the self-regulatory organization shall define:
a) the authority of and the procedure for the activity of the  members and the chairman of the Observers’ Council of the members of the self-regulatory organization, the number and the staff  of the supervisory body;
b) a provision, which states that the supervision of the activity of the executive body of the self-regulatory organization is under the exclusive authority of the Observers Council;
c) a provision, which states that the member of the Observers’ Council  may not act at the same time as the executive director or the member or the chairman of the Board of the self-regulatory organization, and shall have such qualification, which is required from any person acting within the structure or in the name of the member organizations, based on professional qualification;
d) a provision, which states that any matters under the exclusive authority of the Observers’ Council shall not be delegated to the authority of the executive body of the self-regulatory organization.

2. The rules of the SRO shall establish:
a) the procedure for election or designation of the executive director (the chairman), or the Board or the members of the Board, their authorities and the procedure for adoption of decisions;
b) a provision, which states that the executive director of the self-regulatory organization or the chairman of the Board and the Board members are designated by the Observers’ Council and are accountable to it;
c) a provision, which states that the executive director (the chairman) or the Board member and the chairman, as well as any other official person or employee (other than the members or the chairman of the observers council) shall not be the member, official, employee or participant of any professional participant or affiliated with it persons.

Article 95. Supervisory Service of Self-Regulatory Organization

The rules of the self-regulatory organization shall define:
a) the authority of and the procedure for the supervisory service of the self-regulatory organization, its structure and number of the members;
b) a provision, which states that the head, the member and the employee of the supervisory service shall not be the member, official, employee or participant of any affiliated persons, or the member or the chairman of the Observers’ Council, the executive director or the employee of the executive body of such affiliated persons;
c) a provision, which states that the head, the member or employee of the supervisory service shall have such professional qualification as required for persons acting within the structure or in the name of the member organization;
d) a provision, which states the supervisory service implements the supervision on the part of the compliance of the members and persons acting within the structure or in the name of such members with this Law, decisions of the Commission and rules of the self-regulatory organization;
e) a provision, which states that the supervisory service upon finding any violations or inconsistencies in the activity of the self-regulatory organization’s members or any persons acting within the structure  or in the name of such members based on professional qualification, shall, within 5 business days after such finding, inform the members of the supervisory service and the Commission, and institute a disciplinary proceeding.

§2. Registration of Self-Regulatory Organization

Article 96. Unregistered Self-Regulatory Organization

1. Any organizations that are not registered with the Commission as self-regulatory organizations in conformity with this Law are prohibited to act as a self-regulatory organization, or to use such name in their title or in advertising materials for purposes of describing or characterizing their own business (unregistered self-regulatory organization.

2. Professional participants are prohibited to be a member to or to represent themselves as members of any unregistered self-regulatory organization, unless the registration application of such organization is filed with the Commission in conformity with this Law, or if the registration application has been denied, or the registration has been canceled.

3. This Article does not prohibit persons defined by this Article to perform actions specified under Clause 2 of this Article, if:

a) the sole purpose of performing the prohibited action is the establishment of a self-regulatory organization subject to registration  in compliance with the procedure defined by this Law;
b) the registration application of a self-regulatory organization defined under this Chapter is filed with the Commission within the possible condensed period.

Article 97. Registration Application

1. Any registration application for registration of a non-commercial organization as a self-regulatory organization in conformity with requirements set forth by this Law  shall be filed with the Commission and contain the following:

a) information about the identity and location (address) of such organization;
b) information about the persons who are the members of such organization, members or the chairman of the members’ observers council, or the executive director or the member of the executive body, the head or the member of the supervisory service or any other officials.  The registration application for a stock exchange shall also include information about such persons, who, directly or indirectly, own more than 5% of any class of equity securities of such organization;
c) information about the persons, where the organization, directly or indirectly, owns any class of equity security or has any other participation;
d) information on the capital and financial indices of the organization;
e) information about the office space designated for the activity of such organization,  conditions and equipment;
f) any other documents deemed necessary to define the compliance of such organization with the requirements set forth by this Law.

2. The following documents shall be attached to the application:

a) the rules of the organization, and  documents for its technical equipment, in the case of a stock exchange;
b) the payment receipt for the state due established by the statute;
c) other documents defined by this Law and the decision of the Commission.

3. The registration application (and further amendments thereto) is considered to be filed with the Commission upon the date when it (they) is received, but not sooner than the date when the payment receipt for the state due defined by the law is received.

4. Misrepresentation (omission) of any material fact contained in the application for registration or attached documents shall serve as basis for the denial of the application or revocation of the registration.

Article 98. Registration of Self-Regulator Organization

1. Any registration application is considered to be satisfied on the forty-fifth  (45) day of its submission, if the Commission has not satisfied it within such shorter period, except for cases defined by Clause 3 of this Article.  Prior to satisfaction of the application, the Commission shall register the rules of the organization in accordance with Article 100 of this Law.

If any amendment (or an additional document) is filed with the Commission prior to the date when the application is satisfied, the application is considered to be filed with the Commission on the date when such amendment is filed, except for cases when such amendment is filed by the consent or assignment of the Commission given prior to the date of satisfaction of the application.

The Commission shall issue the registration certificate to the organization within 3 days after satisfaction of the application.

2. The Commission, within 5 business days after filing the application, shall publish an announcement about the submission of application, and provide an opportunity for interested parties to submit written recommendations, considerations and arguments about the application.

3. Prior to the date of satisfaction of the application, the Commission shall, after notice and the opportunity for hearing, issue a decision by which, the satisfaction of the application is denied, and which specifies the reasons for such denial, if;

a) the information and documents required in the application are incomplete, or if any material fact is misrepresented (omitted) in them;
b) there are any material inconsistencies with this Law or decisions (normative legal acts) adopted in conformity with it or any other basis for denial established by them, or
c) on the bases provided under Article 99 of this Law, the registration of such person had been canceled (except for the case of volunteer cancellation), within one year prior to the year when the registration application was submitted.

4. In cases when changes occur in the information contained in application after its satisfaction, the professional person shall, within 15 days after learning about such changes, file a corresponding notice with the Commission in conformity with the decision defined by the latter.

Article 99.  Suspension and Cancellation of Registration

1. After the date of satisfying the application, the Commission has the right, after notice and the opportunity for hearing, to issue a decision to suspend the registration of the self-regulatory organization specifying reasons for suspension and instructing to eliminate them and/or not to allow them in the future, if such self-regulatory organization regularly, with obvious bad-faith or disregard;
a) has violated or is continuing to act in violation of the requirements set forth by this Law and decisions (legal normative acts) adopted in accordance with it;
b) does not perform the functions, or is not meeting the requirements defined by its rules, or does not ensure the compliance with the requirements set forth by its rules, or does not prosecute persons who have violated such rules and requirements;
c) has not implemented or is continuing not to implement any order in the decision of the Commission issued within the powers of its authority, other than decisions adopted in conformity with this provision.  The suspension of the registration pursuant to this provision may not be suspended for a period of more than 30 days.

2. After satisfying the application the Commission has the right, by notice and providing the opportunity for hearing, to cancel by its decision (order) the registration of the self-regulatory organization, and specify the grounds for such cancellation (compulsory cancellation), if:

a) such organization has not implemented or is continuing not to implement the order issued in accordance with Clause 1 of this Article;
b) there is any other basis for cancellation of registration, as defined by this Law and other decisions (normative legal acts) adopted in accordance with it;

3. The copy of the decision (order) on suspension or cancellation of registration is provided to the self-regulatory organization within a three-day period after its issuance.

4. In cases when registration is canceled, the self-regulatory organization is subject to liquidation, if the decision (order) of the Commission is not appealed in court procedure within 10 days after its provision to the self-regulatory organization in accordance with Clause 3 of this Article.

5. The registration of the self-regulatory organization may also be canceled based on the notice from the self-regulatory organization (volunteer cancellation), if otherwise is not defined by this Law.

6. The Commission, after notice and the opportunity for hearing, may deny the volunteer cancellation of the self-regulatory organization, or not enforce compulsory cancellation, if:

a) such cancellation deprives the securities market of the only service of vital importance, or
b) such cancellation of registration may create an actual threat for arising of an extreme situation.

§3.  Oversight of Self-Regulatory Organization

Article 100. Registration of Rules of Self Regulatory Organization

1. The rules adopted by the self-regulatory organization and any restatements and amendments thereto shall be submitted for the registration of the Commission and shall become effective on the date of the registration.  The rules defined under Clauses 1, 2 and 4, Article 98 of this Law shall applied to the registration of the rules of the self-regulatory organization.

2. Prior to the satisfaction of any application the Commission may, after notice and the opportunity for hearing, issue a decision (order) to reject the registration of the rules (restatements and amendments thereto) of the self-regulatory organization and specify the bases for such rejection, if such rules and its separate provisions contradict to this Law and other legal acts adopted in conformity with it.

Article 101.  Order for Adoption of Rules or Decision

1. The Commission has the right, after notice and the opportunity for hearing, to order the self-regulatory organization to adopt certain rule (rules) or a certain decision within its authorities, or to take other actions, specifying the grounds for such decision (order), if it finds, that

a) the self-regulatory organization does not have the capacity to regulate or does not regulate the activities of its members;
b) the self-regulatory organization does not have the capacity to control and does not control the consistency of its members’ activity with this Law, decisions (normative legal acts) adopted in accordance with it, and the rules of the self-regulatory organization;
c) the self-regulatory organization does not perform the functions and does not meet the requirements defined by its rules, or  does not ensure the performance of such functions and meeting of such requirements, or does not prosecute the persons, who have violated the rules;
d) such rules or actions are necessary for the protection of investors.

2. In cases when the order issued by the decision of the Commission in conformity with this Article is not executed within the reasonable period, the Commission has the right to issue such rule or decision independently, or take necessary actions on its own initiative.

The rule or the decision (other action) adopted in such procedure is mandatory for the self-regulatory organization and its members, and if such rule or decision is not followed or met, the Commission shall, after advance notice and the opportunity for hearing, deprive separate members of the self-regulatory organization from membership, or suspend or cancel the registration of the self-regulatory organization.

Article 102.  Reconsideration of Decisions

1. The Commission is entitled, on its initiative or on the initiative of any interested person, to reconsider (add, amend, eliminate or approve), after notice and the opportunity for hearing, decisions of the self-regulatory organization on the following: rejection of membership, denial of the application of the issuer on securities listing or inclusion of the securities in the trading system; sanctions imposed on the member; temporary or permanent cease of circulation of the securities listed on the exchange or included in the trading system by the application of the issuer,  and  other acts adopted within the authority of the self-regulatory organization with respect to its members or the third persons.

2. For purposes of exercising its authorities under Clause 1 of this Article, the Commission is entitled to define such decisions and actions, which are subject to submission to the Commission.  Non-compliance with requirements set forth by the decisions (normative legal acts) adopted in conformity with this provision shall serve as basis for compulsory cancellation of the registration of the self-regulatory organization.

Article 103.  Oversight of Self-Regulatory Organization

1. The Commission has the right to regulate and supervise the activity of any self-regulatory organization.  The Commission is entitled, by its decision, to define rules for enforcement of the requirements set forth by this Law.

2. The self-regulatory organization is obliged to submit reports to the Commission, the form, the content and the submission procedure of which are defined by this Law and the decisions (normative legal acts) adopted in accordance with it.

3. The Commission is entitled to inspect the activity of the self-regulatory organization in the procedure and periodicity established by this Law and normative legal acts adopted in accordance with it.  During the inspections, the self-regulatory organization shall provide the required information and documents to the Commission.

Non-provision of such information and documents shall serve as basis for compulsory cancellation of the license.

4. Notwithstanding cases defined by the statute and other legal acts, the Commission shall keep confidential all the information, defined as such by the statute and other legal acts, obtained during the investigation.

Article 104.  Accounting and reporting of Self-Regulatory Organization

1. The self-regulatory organization is obliged to compile and maintain accounting books, registration books and records, for purposes of accurate and complete reflection of its transactions and the use and alienation of its assets.  The requirements defined by Article 33 shall applied to the self-regulatory organization.  The Commission shall define requirements for financial statements of the self-regulatory organization in accordance with rules provided under Article 32.

2. The self-regulatory organization is obliged to file current reports with the Commission, as defined by the decision of the Commission, on its activity and on the activity of its members and participants (in the case of a stock exchange), including quarterly reports, and annual financial statements certified by an independent auditor, in specified form, procedure and periodicity.

The Commission is entitled to require, in addition to current reports, any other special reports, notices and explanations about the self-regulatory organization or its members, or about their activity, as deemed necessary for exercising the authorities defined under this Law.
 
3. The Commission shall, by its decision, define the procedure for the submission of reports.  The Commission shall, by internal procedures and by taking other measures, exclude the disclosure of such reports, other than financial statements, and other information and documents defined by this Law.

CHAPTER X
STOCK EXCHANGES

Article 105.  Stock Exchange; General Provisions

1. A stock exchange is a self-regulatory organization, which organizes public offering and quotation of securities in a specified facility, in accordance with the legislation, other legal acts and the rules established by the stock exchange.  Requirements set forth under Chapter IX of this Law shall applied to stock exchanges, if otherwise is not defined by this Law.

2. The stock exchange does not have the right to perform, directly or indirectly, any professional or any other entrepreneurial activity.

The stock exchange has the right to perform organization of trading activity in any other stock commodities in cases and procedure defined by decisions of the Commission.

3. The stock exchange has the right to establish branches and other separated subdivisions, and become a member of self-regulatory unions.

Article 106.  Membership to Stock Exchange

1. Only brokerage (dealer) companies may become members of a stock exchange.

2. The members of the exchange have the right to directly participate in trading in securities and other stock commodities by using the means of the stock exchange. Other persons may participate in trading executed on the stock exchange only through the stock exchange members.

Article 107.  Characteristics of Management of Stock Exchange

1. Rules defined under Articles 92 and 93 of this Law shall apply to the general meeting of stock exchange members, if otherwise is not defined by this Law.

2. The general meeting of the stock exchange members elects and removes the members and the chairman of the Observers’ Council of the stock exchange members.  The Chairman of the Observers’ Council of the stock exchange members may at the same time hold the position of the executive director of the stock exchange.  The rules set forth under Article 94 of this Law shall apply to the stock exchange, if otherwise is not provided under this Law.

3. The employees of the stock exchange are prohibited to be, directly or indirectly, the founders or members of professional participants, to hold any position therein, or to perform any other paid job for them.

4. Professional participants, their directors and other managers, as well as affiliated with them persons do not have the right to become the executive director or a member of the executive body.

5. The Commission is entitled to define by its decision such rules that are necessary for the clear differentiation of the authorities of management bodies of the stock exchange.

Article 108.  Charter of Stock Exchange

The Commission may define, by its decision, a model charter for the stock exchanges, coming out of the necessity for clear differentiation of authorities of management bodies of the stock exchange and the protection of investors.

Article 109.  Stock Exchange Fees

1. A stock exchange has the right to define a lump sum and annual membership fees and commissions for transactions executed through the use of its facilities.  Such fees are defined by the general meeting of members of the stock exchange.  The Charter of the stock exchange may delegate such authority to the Observers’ Council of the members.

2. Restrictions as to the sizes of the fees collected from customers of the stock exchange for transactions on the stock exchange affected by its members through use of the stock exchange means shall be defined solely by the general meeting of the stock exchange members.

Article 110. Transparency of Trading on Stock Exchange

1. The stock exchange is obliged to take measures as defined by this Law and decisions of the Commission to assure transparency of transactions and the fair price formation of securities.

2. The stock exchange is obliged to ensure the disclosure of information related to trading on the exchange, by furnishing its members with information with respect to the place and time of trading transactions, the list of securities listed for circulation and their prices, information about the results of trading sessions, and other information, the list of which shall be specified by decisions of the Commission, determined as necessary for assuring the operation of regulated and transparent securities market.
 

CHAPTER XI
THE CENTRAL DEPOSITORY Article 111. The Central Depository

Article 111. The Central Depository

1. The Central Depository is a self-regulatory organization, which performs the functions of a centralized custodian, securities registry and clearing and settlement.

2. The stock exchange, professional participants, banks (also including the Central Bank of the Republic of Armenia) may become members of the Central Depository.

Article 112.  Functions of the Central Depository
 
1. The Central Depository, in the procedure defined by this Law, normative legal acts of the Commission and the rules of the Central Depository, shall perform the following functions:
a) as a central custodian shall:
- render custodial  services to customers;
- de-materialize securities and maintain accounts for such securities, in cases and procedure defined by the statute and decisions (normative legal acts) adopted in accordance with the statute;
b) as a centralized registry of securities, based on the contract signed with the issuer, shall maintain a uniform data-base system (registry) about  security owners (holders), and the number, class and category of the securities;
c) as a clearing and settlement agent shall:
(1) determine and clear mutual liabilities (collect and verify information, and compile accounting  documents about the latter);
(2) in the result of transactions in securities, transfer securities on the accounts and perform settlement;
(3) established guarantee funds, in the procedure and sizes defined by the decision of the Commission, for reduction of risks associated with performance of its functions (system risks);
(4) may act as agent for parties in matters related to clearing and settlement.

2. The Central Depository, in accordance with its rules, has the right to render other services deemed necessary or purposeful for the implementation of functions envisaged by this Article, and other related services, in conformity with the procedure and on conditions set forth by decisions of the Commission.

Article 113.  Regulation of Service Fees; Protection of Consumers’ Interests

1. The Commission shall regulate fees for services of the Central Depository.  The Commission shall, on its initiative or on the initiative of the Central Depository, after notice and the opportunity for hearing, define the maximum sizes of fees for services rendered by the Central Depository.

2. The maximum sizes of prices of services defined by the Commission shall provide an opportunity to cover the reasonable cost price, and to allow such profit rate, which will ensure the development of the clearing and settlement system.

3. Prices of services and conditions are public.  Any persons, who meet the criteria defined for persons that have the right to enjoy price discount privileges, shall have an equal opportunity for access to the discount price privileges.

Article 114.  Securities Accounts with the Central Depository

1. Members of the Central Depository have the right to open and manage accounts in accordance with the procedure defined by the Central Depository.  Such accounts may also be opened for other persons in cases and procedure set forth by decisions of the Commission and rules of the Central Depository adopted in conformity with them.

2. The Central Depository shall, upon the request of the owners or holders of the securities under the custody or safekeeping, immediately provide them with extracts of their securities accounts the form of which shall be defined by the rules of the Central Depository.

Article 115.  De-materialization of Securities

1. De-materialization of securities by the Central Depository is executed in conformity with this Law and decisions of the Commission.

2. Transfer of any dematerialized securities shall be performed solely through the accounts opened with the Central Depository in accordance with the procedure defined by the statute and other legal acts, till the time when its maintenance remains mandatory for it.

Article 116.  Authority to Define Additional Requirements

The Commission has the authority to define by its decision such requirements for the Central Depository, which are necessary for the prompt and reliable performance of settlement.
 

CHAPTER XII
THE SECURITIES COMMISSION OF THE REPUBLIC OF ARMENIA

Article 117.  The Commission

1. The Commission of the Republic of Armenia is a state body that acts in accordance with this Law, decisions and normative legal acts adopted in conformity with this Law.  The Commission has the power of state regulation as defined by the statute.

2. The main office of the Commission shall be located in the city of Yerevan.  The seal of the Commission shall have the picture of the national coat-of-arms and “Securities Commission of the Republic of Armenia” words on it.

The Commission may have executive structural subdivisions.

3. In order to accomplish its tasks in the procedure defined under this Law the Commission on the behalf of the Republic of Armenia may:
a) sign agreements, acquire property rights and take obligations on budget system in compliance with the procedure defined by the legislation; and
b) act as a party or a third person in the court.

4. The Commission does not have the right to be directly or indirectly involved in entrepreneurial activity, purchase securities or otherwise make investments.

Article 118. Tasks and Functions of the Commission

1. The tasks of the Commission are to ensure protection of investors in securities, establishment and maintenance of a fair price formation system in the securities market and conditions required for regulated and natural-flow operation and development of fair, transparent and trustworthy market.

2. For the purpose of implementing its tasks within the authorities stipulated by this Law, the Commission shall regulate and control transactions in securities executed in the market of the Republic of Armenia and its participants by establishing regulating and supervisory policy in accordance with this Law.

3. While performing its tasks and functions established by this Law, the Commission acts independently from other state bodies.

Article 119. Cooperation of the Commission with State Bodies

1. While accomplishing its tasks, the Commission, within the limits of its authorities, provides opinion to the Government of the Republic of Armenia about the financial-economic policy and projects of the latter, and collaborates with other state bodies in matters related to the establishment and development of the financial system and creation of favorable investment environment.

2. The Chairman of the Commission may participate, by advisory voting right, in the sessions of the Government of the Republic of Armenia and express written opinion on matters under discussion that shall be attached to the records of the meeting.

Article 120. The Staff of the Commission

1. The Commission is created in the procedure defined under this Law and consists of five members: the Chairman of the Commission, the Vice-Chairman and three commissioners.

2. The President of the Republic appoints the staff of the Commission based on the annual rotation principle for a five-year term, excluding the case foreseen in paragraph 3 of this Article.

3. The first staff of the Commission is appointed for the following terms: the Chairman of the Commission – five years, the Vice-Chairman – four years, and the three commissioners respectively for three, two and one year.  In the event of occurrence of vacancy at the Commission, a new commissioner shall be appointed for the remainder of the removed commissioner’s term.

4. The following persons cannot be members of the Commission:
a) persons who do not have higher education;
b) persons who by the legally enforced court decision are declared as lacking dispositive capacity or having partially dispositive capacity:
c) persons who during the prior three years were convicted by the legally enforced court decision for intentionally committed  crime, or economic crime committed out of disregard;
d) persons who are not citizens of the Republic of Armenia.

5. Commissioners do not have the right to hold position in other state bodies, or be a member of the National Assembly or the Commune authority (“Avagani”), conduct entrepreneurial activity or be engaged in other paid job except for scientific, pedagogical and creative work.  Commissioners do not have the right to hold positions in the management of non-governmental-political organizations.

6. The President of the Republic may remove one or several commissioners, if:
a) they have ceased to be citizens of the Republic of Armenia;
b) they have been declared, by legally enforced court decision, as lacking dispositive capacity or having partially dispositive capacity;
c) they have not performed their official duties for more than six months due to illness or other reasons, or if within one year they have been absent from the sessions of the Commission for more than five times for no valid reason;
d) they have failed to perform their official duties.

The President of the Republic may remove any commissioner based on his/her letter of resignation, and in such case the commissioner shall be deemed to be removed from his/her position after 30 days when such letter has been submitted, if the President of the Republic has not approved his/her resignation prior to such period.  Within 10 days after the removal of the commissioner a new member is appointed in accordance with the procedure defined under Clause 2 of this Article.

Article 121. Authorities of the Commission; Their Delegation

1. For accomplishment of its tasks and functions the Commission is granted the authority delegated by this Law and acts independently within the limits of such authority.

Implementation of separate elements of the authority is mandatory in cases specified by this Law.  If the Law stipulates that the Commission has the right to or may perform any action, the Commission independently determines the necessity of implementation of such action based on the necessity of more effective implementation of regulatory purposes of this Law.

2. Within the limits of its authorities and in cases envisaged by this Law and in compliance with the procedure defined by it, the Commission shall:

a) adopt, by its decisions, legal acts of individual and mandatory (normative) nature (rules, regulations, procedures, orders/instructions, directives, etc.);
b) confirm its   official opinion  or   policy statement on matters  reserved to the  authority of the Commission;
c) confirm approve its  annual financial and operation report;
d) confirm its  Charter, the list and structure of subdivisions,  establishes ethical norms and rules of conduct for its employees and other internal rules;
e) appoint persons who conduct hearings.

Functions established under this provision shall be reserved to the exclusive authority of the Commission.

3. Within its authority and in cases determined by this Law and in compliance with the defined procedure,  the Commission shall:

a) conduct  hearings and adopt individual legal acts based on the  results of such hearings;
b) control the  operation of persons under its controlling authority;

4. The Commission may delegate the execution of its authority defined by Clause 3 of this Article to officials or structural subdivisions.

5. Decisions adopted by the officials or the structural subdivisions within the delegated authority are subject to reconsideration by the Commission upon the written request of any of the commissioners.  Such request shall substantiate the appeal and be submitted within 10 days after the adoption of the decision.  In case the Commission makes no decision within 30 days from the date of receiving the request, the decision made by the official or the structural subdivision remains in effect.

Article 122.  Sessions of the Commission and Decision Making Procedure

1. The Commission organizes its work through sessions.  The session of the Commission is eligible, if at least three members of the Commission, including the Chairman or the person replacing him, participate in the session.

The sessions of the Commission are open-door sessions and minutes (protocol) of such sessions shall be duly taken.   The protocol of such sessions, signed by the Chairman of the Commission, shall be available to the public.

2. Sessions of the Commission shall be called on certain regular basis or as deemed necessary upon the request of any commissioner not less than once a month, excluding cases foreseen by this Law.  The request of the commissioner shall be submitted to the Chairman in writing and shall contain the matter(s) for the discussion of which the session is required to call.  Supporting materials shall be attached to the request.

3. The decisions of the Commission shall be adopted by the majority of votes of the commissioners present at the session, with the exception of cases defined in Article 121, Clause 4 of this Law.  In case of equal distribution of votes, the decision of the Chairman of the Commission or the person replacing him shall be decisive.  The transfer of the vote from one member to another is not permitted.

4. Mandatory (normative) decisions of the Commission become effective on the 10th day upon their registration with the state authorized body in conformity with the procedure established by the legislation of the ROA, if a longer period for the enforcement of the given decision is not defined.

The Commission has the right to adopt decisions of mandatory (normative) nature, which become effective on the date of their official promulgation without the registration specified under the first paragraph of this provision, if the adoption of such decision is required by Article 29 of this Law.

Decisions of the Commission become effective on the moment when they are signed, if such decisions are not of mandatory (normative) nature.

Decisions of the Commission may be appealed in court in the procedure defined by the statute.

5. No less than 30 days prior to the adoption of decisions that define normative legal acts, the Commission shall publish through mass media the proposed draft, a brief statement that explains the urgency for the decision, the location, where the interested parties may submit their recommendations and the time. The Commission shall discuss written recommendations within the specified period of time and include them in the draft, at its discretion.  The Commission shall inform the author of any recommendation on the results of the discussion.

Article 123.  The Chairman of the Commission

1.  The Chairman of the Commission manages and organizes the work of the Commission and schedules all sessions.  The Chairman of the Commission:
a) coordinates  and ensures  the natural flow of the Commission’ activities;
b) presides over the sessions of the Commission,  signs decisions of the Commission and records of sessions;
c) organizes implementation of decisions adopted  by the Commission;
d) represents the Commission in the Republic of Armenia, in other countries and international  organizations;
e) distributes responsibilities  to the commissioners after consulting with them;
f) appoints and removes employees of the Commission, makes decisions on their reward and administrative penalty, after consulting with the commissioners;
g) organizes the preparation of materials  necessary for the adoption of decisions of the Commission, and
h) exercises other authorities foreseen by or proceeding from the laws and the internal charter of the Commission.

2.  Upon the absence of the Chairman of the Commission or the impossibility for him to perform his official duties, the Vice-Chairman of the Commission replaces him; and in case of absence of the latter or the impossibility for him to perform his official duties, the elderly commissioner replaces him.

Article 124. Conflict of Interests

1.  No commissioner or employee of the Commission has the right, directly or indirectly, to accept gifts or other material benefits from professional participants of securities market.

2.  The commissioner having any personal interest in any matter under consideration at the Commission session shall disclose such fact of interest and the nature thereof among other commissioners.  Such disclosure shall be recorded in the protocol of the session, after which  the commissioner shall:

a) resign from participation in the session considering the matter; and
b) not be registered for the purpose of constituting a quorum.

3.  Commissioners do not have the right to participate, directly or indirectly, in transactions in issuer’s securities or transactions performed by professional participants, with the exception of cases stipulated by the statute.

4.  Any securities owned by commissioners or employees (their spouses) shall be alienated or transferred to trust management within one month since the take-over of official duties by the commissioner or the date of employment.

Article 125. Declaration of Income of Commissioners

The Commissioners, within one month after they officially take their positions and, thereafter, in every calendar year, shall provide the President of the Republic and the Commission with copies of the declaration of their income defined by the statute.  The Commission shall disclose such information in the procedure defined by the statute.

Article 126.  Personnel of the Commission

1.  The personnel of the Commission are employees and support staff of the Commission.

2.  The employees of the Commission are persons involved in the accomplishment of tasks of the Commission and holding positions confirmed by the Charter and the staff-list of the Commission.

3.  The support staff of the Commission includes members, who are not directly engaged in the accomplishment of tasks of the Commission, including employees (personnel) involved in the provision of auxiliary services.

4.  The Commission approves, in the procedure defined by the statute, the staff-list, salaries and bonuses of commissioners, employees and the personnel of the Commission.

Article 127. The Charter of the Commission

The Charter of the Commission establishes the procedure for the activity of the Commission, the establishment of structural subdivisions of the Commission and the procedure for their activity, the limits of the authority of their managers and employees and other issues related to matters of internal management of the Commission.

Article 128.  Confidential and Official Information

1.  Commissioners and employees of the Commission shall not disclose or otherwise disseminate confidential information and they must not use for the purpose of their personal advantage confidential or official information received during the performance of their official duties.

2.  Information subject to disclosure or dissemination in conformity with the statute and other legal acts shall not be considered as confidential information.

Article 129.  Annual Expenses of the Commission

1.  Every year the Commission shall develop the budget estimate for the following year, which, without any changes, shall be included by the Government of the Republic of Armenia in the State Budget under a separate line and presented to the National Assembly of the Republic of Armenia for approval.

2.  The budget  of the Commission shall provide opportunity  to duly  accomplish the tasks and functions of the Commission stipulated by this  Law, including:

a) assurance of complete and effective regulation and control of the securities markets in conformity with international standards;
b) assurance of duly representation in international organizations, and payment of appropriate salaries to accomplish the above stated tasks.

Article 130. Accounting and Financial Statements of the Commission

1.  Accounting of the Commission is conducted in compliance with the procedure defined for budgetary institutions.

2.  Before May 1 of every year the Commission shall submit financial reports to the authorized body of the Government of the Republic of Armenia.  This body may conduct an audit at the Commission to verify the accuracy of the financial report, and the Commission shall assist the audit.

Article 131.  Annual Program, Report and Resignation of the Commission

1. Each year the Commission shall develop an Annual Activity Program, which the Government of the ROA shall present, without any changes, to the National Assembly, along with the Draft of the State Budget. The Chairman of the Commission shall present the Program to the approval of the National Assembly.  In case if the Program in not approved, the Commission shall, within ten days, submit a resignation to the President of the Republic, which shall be accepted on the following day when such resignation is submitted.

The Annual Program shall include:
a) analysis of the situation in the securities market, identification of existing problems and development of a schedule of measures directed at solving of such problems;
b) securities market regulation mechanisms directed at:
- protection of investors;
- assurance of the securities market transparency;
- improvement of price formation system of securities, and
- development of settlement and clearing system for transactions in securities;
c) other provisions deemed necessary by the Commission to accomplish tasks and functions defined by this Law.

2. Each year before May 1 the Commission shall submit and disclose the financial report covering the previous year’s activity to the President of the Republic of Armenia and the National Assembly.  The activity report shall include:

a) brief information about the activity of the Commission;
b) analyses of the securities markets;
c) measures taken to regulate and control the securities markets;
d) the financial statement;

3. The National Assembly, in the result of hearing of the Report defined under Clause 2 of this Article, may not approve the Report.

4. After the National Assembly adopts the law specified under Clause 2 of this Article and within 10 days after it becomes effective, the Commission members shall submit resignation to the President of the Republic, which shall be satisfied on the following day of its submission.

5. The President of the Republic, within 15 days after the satisfaction of the resignation, appoints the new staff of the Commission in accordance with Article 120 of this Law.
 

CHAPTER XIII
EXECUTION OF CONTROLLING AUTHORITY OF THE COMMISSION; HEARINGS

Article 132. Controlling and Penalty Exercising Authority of the Commission; General Provisions

1.  The Commission, within its authority, shall control professional participants, their directors and other managers, persons acting within their structure or on their behalf on the basis of professional qualification, issuers and their major shareholders, directors and other managers, and persons, directly or indirectly, involved in major transactions executed in securities market; and imposes penalties in cases and in the procedure defined by the statute.

2.  The Commission performs its controlling authority through control and inspections.

Article 133.  The Commission’s Authority to Inspect Reports

1.  For purposes of performing inspections of reports, the Commission is entitled to determine procedure and terms for reports, references, explanatory notes and other such documents envisaged by this Law and decisions of the Commission.  An electronic way of submission of reports defined under this Clause may be established.

2.  The reports, references, explanatory notes and other such documents shall be made available to the public in accordance with the procedure defined by the Commission, provided that otherwise is not stipulated by this Law.  The Commission has the right to establish exceptions to this rule if it finds that public disclosure of such documents may threaten to the legal interests of investors, or cause violations of procedure for disclosure of state, banking and commercial confidential information.

3.  In cases when any professional participant or issuer fails to submit documents defined under Clause 1 of this Article, or if he/she submits such documents in delay or in any other substantial violation of the established procedure, or if the documents are incomplete, the Commission issues a warning and orders to correct and/or exclude such violations in future.

In the event when more than two such violations occur with bad-faith or obvious disregard at any time within 360 days, the Commission has the right to impose a penalty for a size of one thousand folds of the minimum salary.

Regardless of exercising of any penalty defined under this Clause, the Commission, for every day when the document is delayed, imposes a penalty on the professional participant or the issuer, which shall constitute ten folds of the minimum salary, starting from the third day of the delay.
 

In cases envisaged by this Clause, the Commission is also entitled to deprive of qualification and prohibit the professional participant’s directors, deputy directors (regardless of their fault) and other managers being guilty of such violations to pass qualification for two years.

4.  For violations listed in Clause 3 of this Article and other violations in connection with them, the managers and employees of the professional participant or the issuer bear administrative or criminal liability envisaged by the statute.

Article 134. Inspection Conducting Authority of the Commission

1.  The Commission performs inspections in conformity with the procedure and periodicity defined by the legislation of the ROA.  The Commission is entitled to develop an inspection plan (scheduled inspections) and/or conduct inspections as needed.

2.  In case if persons specified in Article 132 of this Law hinder the inspections or fail to provide the documents required during the inspection, the Commission issues a warning to that person(s), and instructs to correct and/or exclude such violations in future.

In the event when such violations occur more than once at any time within 360-day period, the Commission is entitled to impose a penalty for the size of one thousand fold of the minimum salary.

In cases envisaged by this Clause, the Commission is also entitled to deprive from qualification and prohibit the market professional’s directors, deputy directors (regardless of their fault) as well as other managers being guilty for such violations to pass qualification for two years.

Article 135.  Procedure for Exercising of Penalties imposed by the Commission

1. In cases envisaged by the statute, the Commission is entitled to apply penalties stipulated by the law, including a warning and an order for correcting violations and/or excluding future violations, to impose a penalty for the size envisaged by the law, and to suspend or revoke the license.

2. The Commission or its one or more delegated official(s) shall apply penalties, after notice and the opportunity for hearing.

Article 136.  Hearings

1. If the law stipulates that the Commission shall issue a decision on any matter, after notice and opportunity for hearing, then the Commission shall ensure the discussion of such matter in conformity with rules defined under this Article.

2. The Commission or its one or more authorized officials shall conduct hearings.

3. The hearings are conducted at open-door sessions of the Commission.  If it appears to the Commission or to any of its authorized official person(s) that the open-door session may cause damage to the interests of investors or mislead the securities market, then it may conduct closed-door hearings, as exceptions.  Appropriate records of hearings in reasonable details shall be kept.

4. The right of any interested person to participate in the hearing (the opportunity for hearing) shall be guaranteed, except for cases foreseen by this Law.

At least within 5 days prior to application of the penalty, the Commission shall duly notify the interested person about the place, date and time of the hearing.  Such notice shall include the nature and the brief description of the matter subject to discussion, and shall have an attachment including materials, evidences and sources of their origin that are available and may affect the result of the case.

The absence of the notified interested person at the hearings shall not be an obstacle for conducting of such hearing.

5. If present, the interested person has the right to present written and/or oral evidences, explanations and argumentation, and object against application of the envisaged penalty, as well as to initiate other intercessions.

6. After hearing a substantiated decision is developed on behalf of the Commission with statement of the facts that serve bases for such decision.

7. Within the shortest possible period, but not later than on the third day of publication, the copy of the decision is provided or delivered through registered mail to the person about whom the decision was made.

8. The decision of the Commission enters into effect on the date of its publication and may be appealed in court procedure within 30 days after the effective date.

CHAPTER XIV
LIABILITY AND VALIDITY OF CONTRACT

§1.  Administrative Liability

Article 137.  Order (Warning)

1. In cases when any person violates this Law, other laws that regulate the securities markets and decisions (normative legal acts) adopted in conformity with them, the Commission by its decision is entitled, after notice and the opportunity for hearing, to issue an order with warning and instruction (hereinafter also referred to as “the order”) to correct and/or to exclude such violation in future.

2. The order becomes effective on the date of its issuance (promulgation of the decision) and is subject to mandatory enforcement by the warned person.  The order may include the sequence of measures, which shall be necessary to take in order to bring the activity of the warned person into consistency with this Law and other legal acts.

3. The Commission may issue an order without providing the opportunity for hearing as defined by this Law, if the immediate issuance of such order is deemed necessary for the protection of investors’ interests or preventing the arising of the extreme situation in the securities market.  Such order shall become effective on the date when the addressee receives the decision on issuance of such order.

4. The order shall substantiate the reasons, including the written statement of such facts that have served as grounds for the decisions of the Commission.  Any actions by persons, which may cause the violation of the securities regulation laws and other legal acts, may serve as basis for such decision of the Commission.

Article 138.  General Administrative Liability

1. In cases when any person warned in conformity with the procedure defined under Article 137 of this Law, with bad-faith or obvious disregard fails to enforce the order on the correction and/or exclusion of future violations, the Commission may impose penalties established by this Article.  The sizes of fines for every case of violations exercised by the Commission shall be established by decisions (normative legal act) of the Commission.

2. The Commission defines the sizes of fines for every case of violation, which, if a greater size of an administrative fine is not foreseen for separate violations by this Chapter or other laws, shall not exceed:
a) one thousand fold  of the minimum salary in the case of a natural person, and
b) two thousand fold of the minimum salary in the case of a juridical person.

3. Additional fines shall be imposed for continuous violations: for each day of every violation not more than:
a) one hundred fold of the minimum salary, in the case of a natural person, and
b) two hundred fold of the minimum salary, in the case of a juridical person.

4.  When determining the size of the fine the Commission shall take into consideration:
a) the nature of the violation (deceit, fraud and existence of such other intention);
b) existence of damage, and its size, caused to other persons by the violation;
c) the extent of the unjust enrichment, taking into account compensations given to other persons;
d) the circumstance whether such person has previously permitted or has been liable to such or other violation,  and the size and nature of the previous  violation;
e) the extent of the necessity to exclude  future violations by the same or other persons, etc.

5. Any fines defined under this Article shall be levied to the State budget.  In cases of non-payment, such fines shall be levied in court procedure, based on the claim of the Commission.  The Commission shall be exempt from any state dues established for submission of claims.  In cases of actual or possible insufficiency of the means, such fines shall be collected after meeting requirements by any civil claims, and after payment of any penalties and fines defined by other laws.

6. For the purposes of preventing failure to comply with orders issued by decisions of the Commission by any persons without professional qualification or any citizens who are not deemed officials of a reporting issuer, the Commission shall, prior to the enforcement of the administrative liability set forth under this Law, take actions in order to explain such persons the purpose, the essence and the legal consequences of any failure to comply with such orders.

Article 139. Liability for Disclosure of Official information

1.  Disclosure of official information or any violation of the liability to keep such information confidential shall lead to penalty from two to ten thousand fold of the established minimum salary.  The penalty is exercised in court procedure by the claim of the Commission or the interested person.

2.  Any professional persons shall also be liable for any violation defined under Clause 1 of this Article committed by his/her employee, if the latter has failed to perform the liability to keep official information confidential as defined under this Law.  Any insufficiencies in technical measures or administrative rules undertaken by the professional participant to ensure the proper safekeeping of official information may not independently serve as basis for the liability established by this Article.

Article 140.  Liability for Use of Inside Information

1. Except for fines defined under Article 138 of this Law, the Commission has the right to apply to the court, for imposing penalty for violation of the requirements of Article 49 of this Law.

2. In case when the court proves the fact of commitment of violation, the person who has acted in violation and any other person who has abetted or aided such person or concealed such violation, shall be subject to imposition of a penalty at the maximum size of  the following amounts:
a) ten  thousand fold of the minimum salary;
b) three times of the profits received in the result of the violation, or three times of the damage (loss) caused in the result of the violation.

3. When determining any fine the court shall take into consideration the circumstances defined under Clause 4, Article 138 of this Law, and the material (property) condition in the case of a natural person.

4. Any fines defined under this Article shall be levied to the state budget.  In cases of non-payment of fines, such fines are levied in court procedure, based on the claim of the Commission.  In cases of actual or possible insufficiency of the means, such fines are collected after meeting requirements by any civil claims, and after payment of any penalties and fines defined by other laws.

5. Limitation of actions for the requirement defined under this Article shall be five years, and is calculated from the date when the violation is made.

6. Under Article 2, b of this Law “the received profit” and “the caused damage” constitutes the difference between:
 - the purchase or the sales price of the security, and
- the market value of the security established after and in the result of publication of the inside information, within reasonable time period.

Article 141. Additional Liability

The administrative liability envisaged by this paragraph is applied together with any other liability (criminal, administrative, civil or other) as the main or additional liability.

§2. Civil Liability

Article 142.  Liability for Misrepresentation of Information
 
1. Any person, who misrepresents (omits) or otherwise makes it misleading any material fact in any provision in any application, statement, report or any other such documents filed pursuant to this Law or decisions (normative legal acts) adopted in accordance with it, or in any provision (in the announcement or information) of any amendments or documents attached to the above-mentioned documents, shall be liable to any person for damages caused to him, who not knowing that such provision was false or misleading, and  who, in reliance upon such provision (a person under the influence of material misapprehension ) has purchased or sold any security at the price, which was affected by such provision.

Such liability shall not be created for the actions, for which liabilities are defined under Chapter II of this Law.

2. For purposes of determining the issue of indemnification of actual damages caused to the purchaser, the misapprehension of the purchaser is considered to be caused by the fault of the person, who has performed the actions defined in the first part of Clause 1 of this Article, unless the latter proves that he, acting in good faith, had no knowledge of any mislead or omission of any material information.

3. Any person, who discloses information defined as protected information in accordance with this Law or fails to perform the liability to keep confidential such information, shall bear liability for any damage caused to the client in the result of such violation. Any insufficiencies in technical measures or administrative rules undertaken by the professional participant to ensure the proper safekeeping of official information may not independently serve as grounds for the liability established by this Article.

4. Limitation of actions for such claims is one year after the discovery of the mentioned mislead (omission), but not later than the date when the document containing such provision is submitted.

Article 143.  Liability of Managers

1. Any member of the board of directors (any such other body) or the executive body (if such body adopts decisions by voting) of any reporting issuer when voting in favor of any decision in violation of obligations defined under Clause 1, Article 40 of this Law, or any director (member of the executive body) or any official (head of the subdivision or an advisor) of any reporting issuer, when adopting a decision or providing a written advice in violation of the obligations set forth by Clause 1 of Article 40 of this Law, bears joint and several liability (correspondingly,  with other persons which have voted for or adopted such decision, or provided such advice) for any damage caused  to the issuer by such decision or advice, except for cases provided under Sub-clause 2 of this Article.

Indemnification for such damage may be claimed, by court procedure, by the issuer or, if he refuses to do so, by any owner of such securities of the issuer, which are registered or are subject to registration in accordance with Chapters II and/or III of this Law.

2. Any persons specified in  Clause 1 of this Article (in this provision hereinafter referred to as “the responsible person”) are exempt from liability set forth by the same provision, if:

a)  the responsible person (other than the person who has made the decision independently, and the advisor, on the part of his provided advise);

(1) has refused to perform requirements of such decision, within his official authority;
(2) has notified, within 3 days after the decision was made, the Commission and members of the board (or any other such body) by announcing that he shall not bear the liability for the decision or for any consequences of its relevant part, or

b) proves that such decision or advice is compelled by this Laws or other legal act, or
c) proves that when voting in favor of such decision, or making such decision, or providing such advice, or performing his official responsibilities, he was not aware that it might cause damages and he relied upon information, expert opinion, reports or documents developed or suggested by:

(1) one or more official persons or employees of the issuer, within the limits of their official duties;
(2) the employee of the issuer, or the advisor, accountant, financial advisor or any other person with the right to provide an expert opinion and working on contractual basis for the issuer, other than cases described under Clause 3 of this Article.

3.  Any responsible person shall not be exempt from liability set forth by Clause 2, c) of this Article, if it is proved that:

a) he had knowledge of such mistake or inaccuracy in the above-mentioned documents, which caused the damage, or
b) the responsible person’s position and the knowledge of the subject, in case of sound survey could have allowed him to reveal the mistake or inaccuracy or the inevitability of the damage, and he has not performed a conscientious survey.

4. Limitation of actions for such claims shall be one year from the date of discovery of such violation, but not more than three years from the date when the violation was permitted.

Article 144.  Liability for Price Manipulations and Use of Deceptive Devices

1. Every person who, with direct or indirect intention, has performed actions or executed transactions prohibited under Articles 48 and 50 (2), shall bear joint and several liability for any damages caused to any person, who has purchased or sold a security at a price affected by such action or transaction.

2. Limitation of actions for such claims shall be one year after the date of discovery of such violation, but not more than three years after the date when the violation was committed.

Article 145.  Liability of Use of Inside Information

1. Any person, who violates any requirements set forth by this Law and decisions (normative legal acts) adopted in accordance with it, by purchasing or selling any security when in possession of any inside information, shall be liable for any damages caused to any person, who, parallel to or at essentially the same time has purchased (if the violation has been done through the sale) or sold (if the violation has been done through the purchase) any securities of the same class.

2. Any person, who violates the requirements set forth by this Law and decisions (normative legal acts) adopted in accordance with it, by communicating inside information to other persons, or by taking other actions in violation of Article 49, Clause 2, b and c, shall bear joint and several liability pursuant to Clause 1 of this Article, together with such other responsible person, to whom he has communicated the inside information, or who has taken any other action.

3. The total size of any damage subject to indemnification shall not exceed the size of the profits received in the result of such violation or the size of the prevented damage (loss) stipulated by Clause 1 of this Article.

4. If any transaction in any class of security that is executed in violation of any requirements set forth by this Law and decisions (normative legal acts) adopted in conformity with it, by creating the liability defined under this Article, then, in relation to any purchase or sales of any derivative of such security, such conduct creates a comparable liability as to such liability defined under this Article.

5. Under Clause 3 of this Article “the received profit” or “the caused loss” shall constitute the difference between:
- the purchase or sales price of the security, and
- the market value of such security, which was formed after and in the result of disclosure of the inside information within reasonable period.

6. Limitation of actions for such claims shall be five years after the date of the last transaction considered as violation.

Article 146. Liability of Controlling Persons

1. Any person, who by (through) stock ownership, contract or arrangement, or otherwise (independently or together with other persons), controls (the controlling person), directly or indirectly, any person (the controlled person) bearing civil liability under this Law shall also be liable jointly and severally with and to the same extent as such controlled person is liable, unless the controlling person acted in good-faith and did not have any knowledge of the fact of violation, and upon obtaining such knowledge has informed the Commission about it, and within the possible extent has taken actions to prevent the violation or its continuity.

2. No person shall be liable under this Article for sole reason of employing another person who is bearing civil liability under this Law, but the liability of a controlling person shall be subject to Clause 1 of this Article.

Article 147.  Additional Liability

1. The rights and liabilities defined under this Chapter shall not limit the exercising of any rights and the enforcement of any liabilities stipulated by other laws.

2. The civil liability defined under this Chapter shall not arise for violation of any provision of Chapter II of this Law, if a liability for such violation arises in conformity with Articles 12, 13, and 16 of this Law.
 

§3. Validity of Contract

Article 148.  Invalidity of Agreement to Change Requirements of This Law

Any transaction or agreement concluded in violation of any requirements of this Law or on condition of changing of any of its requirements shall be void.

Article 149. Invalidity of Rights Acquired by Contract

1. Any contract concluded in violation of any provision under this Law and decisions (normative legal acts) adopted in conformity with it, and any contract the performance of which involves the violation of such provisions shall be void as regards to any portion of rights of any person:
 
a) who has made or performed (is performing) any such contract, in violation of this Law and decisions (normative legal acts) in accordance with it;
b) who, not being a party to such contract, has acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation any provision of this Law and decisions (normative legal acts) adopted pursuant to it, other than cases stipulated by Clause 3 of this Article.

2. Any contract made in accordance with Clause 1, (b) of this Article shall be deemed to be void (disputable) by such part of the contract, if a claim is brought by such person, from whom (for who) any broker has purchased any security, or to who (for whom) any broker has sold any security in violation of any provision of this Law and normative legal acts adopted in accordance with it.  Limitation of actions for such claims shall be one year after the date when the claimant acquired knowledge of such transaction was in violation, but not more than three years after the date of violation.

3. This Article shall not provide grounds to argue against any claim, which is brought by any person who has acquired such rights in good faith and by compensation, and without actual knowledge of such violation.

Provisions of this Article shall not alter the validity of any transactions, which were made or performed prior to this Law becoming effective.

CHAPTER XV
TRANSITIONAL PROVISIONS

Article 150.  Effective Date and Enforcement of This Law and its Separate Norms

1. This Law shall become effective from August 1, 2000, except for the norms stipulated by this Chapter.

2. Article 5 of this Law shall become effective on the 10th day of publication of decisions (normative legal acts) required under Articles 9 and 10, but not later than October 1, 2000.

3. Effective dates of Articles of this Law:

a) Article 19 shall become effective on the 10th day of publication of decisions (normative legal acts) required under Article 20, but not later than November 1, 2000;

b) Clause 1, Article 23 of this Chapter shall become effective on the 10th day of publication of decisions (normative legal acts) required under the Clause 2 of the same Article, but not later than October 1, 2000;

c) Under Clause 1 b), Article 4 a reporting issuer is considered any person, who meets the requirements of this Sub-clause starting from October 1, 2000.

4. Effective dates of Articles of this Law:

a) Article 31 shall become effective on the 10th day of publication of decisions (normative legal acts) required under Articles 31 and 32, but not later than December 1, 2000. In addition, the first quarterly report in conformity with Article 34 shall be published for the third quarter of the year of 2000, and the annual reports shall be published for the year of 2000.  Prior to this Article becoming effective, the requirements for the reports of reporting issuers defined under acting laws and decisions (normative legal acts) shall be applied.  Prior to the adoption of decisions (normative legal acts) required under Article 32 of this Law, rules defined for financial statements under acting laws and decisions (normative legal acts) shall be applied;
b) Articles 34, 36 and 37 shall become effective on the 10th day of publication of decisions (normative legal acts) required under Articles 34, 35 36 and 37, but not later than October 1, 2000.

5. Any rules defined under Article 57 shall not apply to such transactions in the result of which any person becomes the owner of 75 and more percent of any class of equity securities of any issuer prior to September 1, 2000, if such person has not acquired such additional securities of the same class after August 31, 2000.

6. The norms of Chapter IX of this Law on the part of the stock exchanges, and the norms of Chapter X shall become effective on October 1, 2000.

7. The Commission shall organize the elucidation of the pubic to ensure the public awareness of the requirements defined by the provisions of this Law and other rules.

Article 151.  Effectiveness of Norms that Define Liability

1. Any norms that define liability shall be applied to such violations, which are performed after the date when such norms become effective.

The Commission shall organize the elucidation of the pubic to ensure the public awareness of the liabilities defined by the provisions of this Law.

2. Articles 12, 13 and 16 of this Law shall become effective from November 1, 2000.

3. Articles 142, 143, 144, 145 and 146 of this Law shall become effective from January 1, 2001.

4. Article 138 of this Law shall become effective from March 1, 2001, and sanctions defined under this Article shall be applied to any persons, who have performed such violation after the effective date.

5. Article 139 shall become effective from July 1, 2001, and sanctions under this Article shall be applied to any persons, who have performed such violation after the effective date.

Article 152.  Application of Requirements for Securities Form

1. The requirements defined under Clause 2, Article 42 of this Law shall apply to any securities issued after April 1, 2001, and after August 1, 2001 the requirements shall be applicable to all the securities.

2. The rules defined under Article 42 of this Law shall apply to any securities issued after September 1, 2000, and after January 1, 2002, the requirements under this Article shall apply to all the securities.

Article 153.   Compliance with Acting Legal Acts

1. The Law of the Republic of Armenia on “Circulation of Securities” adopted in 1993 shall become invalid from the date when this Law becomes effective.

2. The Commission shall reserve the authorities granted to the Securities Market Inspectorate of the Republic of Armenia by Decision No. 496 of the Government of the Republic of Armenia, dated September 30, 1994.

3. Other decisions (normative legal acts) adopted in the area of securities market regulation continue to be in effect, until the Commission declares them invalid or makes necessary restatements in or amendments to such acts. However, the effectiveness of any other act, which is not adopted in conformity with this Law shall automatically cease from September 1, 2000, if otherwise is not provided under this Chapter.

Article 154.  Establishment of the Commission

1.  Within ten days after this Law becomes effective, the President of the Republic appoints the Chairman of the Commission, his deputy and other members of the Commission, in conformity with Clause 3, Article 120 of this Law.
 
2.  Article 129, Clause 2 (b) shall become effective from January 1, 2001.

Article 155.  Re-Licensing of Professional Participants

1. Prior to this Law becoming effective, licensed professional participants of the securities markets shall act in accordance with this Law and maintain their licenses, until:
a) the 60th (including that day) after decisions (normative legal acts) required under Articles 62 and 63 become effective, excluding cases provided in Clause 2 of this Article. The Commission may extend such period for 15 days, or
b) receiving a license in accordance with this Law;
 
2. Prior to this Law becoming effective, any licenses for professional activities shall be revoked, if licenses for the given activity are not required under this Law.

Article 156. Registration of Stock Exchanges
 
1. Licenses for stock exchange activity of any stock exchanges acting in the Republic of Armenia or any exchanges having stock subdivisions shall remain effective, until their cancellation in accordance with Clauses 2 and 3 of this Article.

2. Effective licenses of the stock exchanges that failed to submit registration applications in conformity with Article 97 of this Law prior to November 1, 2000, shall become invalid on the same day, and such stock exchanges shall terminate their activity (reorganize into a juridical person engaged in other activity, or liquidate).

3. Stock exchanges acting in the Republic of Armenia that have submitted registration applications pursuant to Article 97 of this Law shall maintain their licenses until the registration application is satisfied in compliance with Article 98 of this Law, or the decision on denial is issued, after which such licenses shall be revoked.

Article 157.  Establishment and Election of the Central Depository

1.  All state shares of the “Central Depository of Armenia”, Closed Joint Stock Company, established by Decision No. 210 of the Government of the Republic of Armenia, dated April 8, 1999, shall be transferred, prior to June 31, 2001, to a self-regulatory organization, which is established or selected as the Central Depository.  The shares are transferred free of charge (other than the cases defined under this Article), provided that members of the Central Depository shall pay specified lump-sum membership fees or take the liability to pay the fees within one year.

2.  After the transfer of such shares to the Central Depository pursuant to Clause 1 of this Article, “the Central Depository of Armenia”, Closed Joint Stock Company, shall be immediately reorganized, by the power of this Law.  Any rights and liabilities of “the Central Depository of Armenia”, Closed Joint Stock Company, shall be passed to the Central Depository.

3.  Any functions defined under Article 112 of this Law shall be uninterruptedly performed during the entire process of reorganization.  For the purpose of assuring the enforcement of this requirement, the Commission shall have the authority to define conditions necessary for the transfer of shares and the process of reorganization.

4.  The Commission shall, prior to February 1, 2001, set forth and publish tender conditions for the registered self-regulatory organization (except for stock exchanges).

Organizations that participate in such tender shall be established as a union of juridical persons, and solely for purposes of performing functions defined under Article 112 of this Law.

Technical equipment of an organization shall not serve as precondition for registration of the organization or participation in the tender.
 
5.  Conditions for tender for the selection of the self-regulatory organization shall take into consideration:

a) compliance of the self-regulatory organization with the requirements of this Law;
b) adequacy of the rules and management bodies of the self-regulatory organization with the capability to enforce the purposes of this Law;
c) structure and number of members;
d) experience of management bodies and officials, their readiness and capability to implement the purposes of this Law and the functions of the Central Depository;
e) existence of a business plan, its preparedness and the extent of its feasibility;
f) other circumstances defined by the tender conditions.

6.  If within 30 days after the publication of the conditions for the tender, only one self-regulatory organization shall file an application for participation, then the Commission shall close the tender, and conduct direct negotiations with the organization which filed the application, for purposes of ensuring proper compliance with the criteria defined under Article 5 of this Law. Within the limits of the negotiations the Commission may require the organization to improve its rules and management system, and to present other conditions for membership, representation of members and any other conditions deemed necessary for the prompt and efficient fulfillment of any functions defined under Article 112 of this Law.

7.  Upon summarizing the results of the tender, or in the result of negotiations provided under Clause 6 of this Article and in case when the requirements and conditions are satisfied, the Commission shall announce the winner organization, and grant such organization the exclusive privilege of using the “Central Depository” word combination in its name and the right to perform functions defined under Article 112.

8.  In the case prescribed under Clause 6 of this Article, if no accord is reached in the result of negotiations, or in the case when there shall be no application to participate in the tender, the Commission shall announce about the establishment of the new self-regulatory organization and the commencement of the process of applying for membership to such self-regulatory organization. Upon attracting the defined number of members and registering the self-regulatory organization in conformity with this Law, the Commission shall grant to such organization the exclusive privilege of using the “Central Depository” word combination in its name and the right to perform functions defined under Article 112.

President of the Republic of Armenia
Robert Kocharyan

28 July, 2000
AL-82