More detailed results of the assessment are summarised in Table 1.2.2.1 below:
Table 1.2.2.1 Georgia: Assessment of the Implementation of the IOSCO Principles
for Securities Regulation
IOSCO Principles for Securities Regulation
C[14]
PC[15]
MNC[16]
NC[17]
NA[18]
Comments
Principle 1 - Clear responsibilities. The responsibilities of the regulator should be clearly and objectively stated.
X
Principle 2 - Independence and accountability. The regulator should be operationally independent and accountable in the exercise of its functions and powers.
· The scope of accountability is limited.
· Lack of legal immunity for NSCG staff acting in good faith.
Principle 3 - Adequate power, resources and capacity. The regulator should have adequate powers, proper resources and the capacity to perform its functions and to exercise its powers.
Seriously insufficient budget. As the market develops, more revenue from fees can be expected.
Principle 4 - Clear and consistent regulatory process. The regulator should adopt clear and consistent regulatory processes.
Principle 5 - Professional standards. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.
Code of ethics awaited, and introduction of a system of independent assessment may be considered.
Principle 6 - Use of Self‑Regulatory Organizations (SROs). The regulatory regime should make appropriate use of SROs that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.
Principle 7 - Supervision of Self‑Regulatory Organizations (SROs). SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.
No specific oversight program to supervise SROs has been established.
Principle 8 - Adequate inspection, investigation and surveillance powers. The regulator should have comprehensive inspection, investigation and surveillance powers.
· Inspection power over Reporting Companies and their major shareholders is not adequate.
· Investigation power not adequate.
Principle 9 - Adequate enforcement power. The regulator should have comprehensive enforcement powers.
Enforcement power on the basis of criminal legislation limited.
Principle 10 - Effective use of the powers. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and the implementation of an effective compliance program.
Limited power was well used. Faced with a severe resource constraint.
Principle 11 - Authority to share information. The regulator should have the authority to share both public and non‑public information with domestic and foreign counterparts.
Principle 12 - Information sharing mechanisms. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.
No specific MOU or other agreement / procedure has been established.
Principle 13 - Assistance to foreign regulators. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and the exercise of their powers.
Lack of legal immunity of NSCG staff in handling sensitive information in good faith.
Principle 14 - Full, timely and accurate disclosure. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.
Sound rule but compliance needed (due to the lack of enforcement power of NSCG over Reporting Companies?)
Principle 15 - Fair and equitable treatment of securities holders. Holders of securities in a company should be treated in a fair and equitable manner.
Compliance needed. (Private rights of action including class action are not established while the NSCG’s enforcement power over Reporting Companies is limited.)
Principle 16 - Accounting standards. Accounting and auditing standards should be of a high and internationally acceptable quality.
IAS recognized but not fully adopted in practice.
Principle 17 - Eligibility standards. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.
No law, no CISs.
Principle 18 - Legal form and structure. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.
Principle 19 - Disclosure for suitability and valuation. The regulations should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.
Principle 20 - Basis for valuation and pricing for redemption. The regulations should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.
Principle 21 - Entry standards. The regulations should provide for minimum entry standards for market intermediaries.
Principle 22 - Initial and on-going prudential requirements. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.
Monthly capital. adequacy report not audited. NSCG does not have power to reject an auditor.
Principle 23 - Internal organization and operational conduct and risk management. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.
No specific requirement of compliance officer / dept. with specific responsibilities.
Principle 24 - Procedures for failure. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.
No procedures to manage winding down of a failed broker although other investor protection legislation, and regulations have been prepared.
Principle 25 - Authorization and oversight of exchanges. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.
Principle 26 - On-going supervision of exchanges and trading systems. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.
· NSCG has no real time access to trading information, no real time oversight.
· SML does not expressly require fair trading rules for different members.
Principle 27 - Trading transparency. The regulations should promote transparency of trading.
SML does not expressly require real time transparency of pre-trade information for direct market participants.
Principle 28 - Detection and deterrence of unfair trading practices. The regulations should be designed to detect and deter manipulation and other unfair trading practices.
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