Michael Wilson & Partners, Ltd. New Rules Relating to Securitisation Transactions in Kazakhstan
Legal Framework
Securitisation is relatively new in the Kazakhstani securities market. A legal framework for securitisation transactions in Kazakhstan was only established on 20 February 2006.
Securitisation transactions are principally regulated by the Law of the Republic of Kazakhstan “On Securitisation”, No. 126-III dated 20 February 2006 (the “Securitisation Law”), which establishes the legal basis and conditions for securitisation in the Republic of Kazakhstan, determines particular requirements for the assignment of receivables upon securitisation transactions and the issue of notes by a Special Purpose Vehicle (SPV), and sets out the requirements for the founders and the creation and operation of SPVs.
There are also other legislative acts which were amended in connection with the adoption of the Securitisation Law, among them, the Laws of the Republic of Kazakhstan “On Securities Market”, “On Accounting and Book-keeping” and “On Bankruptcy”.
Further, the National Bank of Kazakhstan (NBK) and the Agency of the Republic of Kazakhstan on Regulation and Supervision over Financial Markets and Financial Organisations (FMSA) have recently issued rules and regulations concerning securitisation in Kazakhstan.
Voluntary reorganisation or liquidation of the SPV
The FMSA recently approved the Rules concerning the procedure for the issue of an FMSA permit for the voluntary reorganisation or liquidation of an SPV.
According to the Rules, the voluntary reorganisation or liquidation of an SPV may be conducted only with an FMSA permit.
In order to obtain a permit for voluntary reorganisation or liquidation, an SPV should provide the FMSA with the following documents:
(i) a completed application form for the issue of a permit;
(ii) a copy of the Resolution of the SPV’s supreme body (the general meeting of shareholders/participants or the sole shareholder/participant) as to the voluntary reorganisation or liquidation; and
iii) the FMSA’s report(s) approving the statement of results of the redemption of all the SPV’s issued bonds.
Copies of these documents should be signed and then sealed by the head of the SPV.
The FMSA should issue a permit within thirty (30) calendar days from the date of receipt of the required documents. If the FMSA refuses to issue a permit for voluntary reorganisation or liquidation, it should notify the SPV in writing, indicating the grounds for refusal. The SPV may then re-apply for the issuance of an FMSA permit.
Investment and custody of the SPV’s temporary available funds generated from the underlying assets
Temporarily available funds generated from the underlying assets, e.g. assigned receivables, may be invested by a professional securities market agent or by the SPV itself in financial instruments, a list of which is established by the FMSA.
According to this list, the temporarily available funds generated from the underlying assets may be invested in the following financial instruments:
(i) debt securities;
(ii) shares;
(iv) derivatives; and
(v) deposits in second-tier banks.
The agent engaged by the SPV with a view to investing temporarily available funds generated from the underlying assets, e.g. assigned receivables, must be a professional securities market agent and must have a licence for investment portfolio management issued by the FMSA (the “management agent”). The SPV and the management agent should conclude an agreement temporarily to invest the available funds generated from the underlying assets.
If the SPV elects to invest the temporarily available funds generated from underlying assets, it should have an employee or an officer who holds a certificate enabling him/her to carry out activities relating to portfolio management.
The Securitisation Law also requires that the SPV places the underlying assets in the custody of, and accounted for, by a custodian bank pursuant to a custodian agreement. The provision of custodian services is also a licensed activity.
The NBK has amended the following legislative acts, which came into effect on 5 June 2006:
(a) Rules on Investment Portfolio Management. The amended provisions establish the procedure for the verification of the transferred assets of the SPV to a new management agent in case of the termination of the investment portfolio management agreement;
b) Rules on Custody Activity in the Securities Markets.
According to the amended Rules, in order to control the investment of an SPV’s assets, a custodian should open for the SPV both a separate investment account for the securities and a bank account for the monies generated from the invested securities.
The Rules also establish the procedure for the verification of the transferred assets of the SPV to a new custodian bank in case of the termination of the custodian agreement.
The NBK has also approved the typical forms of custodian agreements concluded between:
(i) the custodian bank, the management agent and the SPV;
(ii) the custodian bank and the SPV when the SPV is temporarily investing available funds generated from the underlying assets which it has invested itself.
It should be noted that the monies in the accounts in national (Tenge) and foreign currency, as well as the financial instruments referred to above, may not be the subject of any pledge, guarantee or other obligation of the management agent or of the SPV.
Securitisation is relatively new in the Kazakhstani securities market. A legal framework for securitisation transactions in Kazakhstan was only established on 20 February 2006.
Securitisation transactions are principally regulated by the Law of the Republic of Kazakhstan “On Securitisation”, No. 126-III dated 20 February 2006 (the “Securitisation Law”), which establishes the legal basis and conditions for securitisation in the Republic of Kazakhstan, determines particular requirements for the assignment of receivables upon securitisation transactions and the issue of notes by a Special Purpose Vehicle (SPV), and sets out the requirements for the founders and the creation and operation of SPVs.
There are also other legislative acts which were amended in connection with the adoption of the Securitisation Law, among them, the Laws of the Republic of Kazakhstan “On Securities Market”, “On Accounting and Book-keeping” and “On Bankruptcy”.
Further, the National Bank of Kazakhstan (NBK) and the Agency of the Republic of Kazakhstan on Regulation and Supervision over Financial Markets and Financial Organisations (FMSA) have recently issued rules and regulations concerning securitisation in Kazakhstan.
Voluntary reorganisation or liquidation of the SPV
The FMSA recently approved the Rules concerning the procedure for the issue of an FMSA permit for the voluntary reorganisation or liquidation of an SPV.
According to the Rules, the voluntary reorganisation or liquidation of an SPV may be conducted only with an FMSA permit.
In order to obtain a permit for voluntary reorganisation or liquidation, an SPV should provide the FMSA with the following documents:
(i) a completed application form for the issue of a permit;
(ii) a copy of the Resolution of the SPV’s supreme body (the general meeting of shareholders/participants or the sole shareholder/participant) as to the voluntary reorganisation or liquidation; and
iii) the FMSA’s report(s) approving the statement of results of the redemption of all the SPV’s issued bonds.
Copies of these documents should be signed and then sealed by the head of the SPV.
The FMSA should issue a permit within thirty (30) calendar days from the date of receipt of the required documents. If the FMSA refuses to issue a permit for voluntary reorganisation or liquidation, it should notify the SPV in writing, indicating the grounds for refusal. The SPV may then re-apply for the issuance of an FMSA permit.
Investment and custody of the SPV’s temporary available funds generated from the underlying assets
Temporarily available funds generated from the underlying assets, e.g. assigned receivables, may be invested by a professional securities market agent or by the SPV itself in financial instruments, a list of which is established by the FMSA.
According to this list, the temporarily available funds generated from the underlying assets may be invested in the following financial instruments:
(i) debt securities;
(ii) shares;
(iv) derivatives; and
(v) deposits in second-tier banks.
The agent engaged by the SPV with a view to investing temporarily available funds generated from the underlying assets, e.g. assigned receivables, must be a professional securities market agent and must have a licence for investment portfolio management issued by the FMSA (the “management agent”). The SPV and the management agent should conclude an agreement temporarily to invest the available funds generated from the underlying assets.
If the SPV elects to invest the temporarily available funds generated from underlying assets, it should have an employee or an officer who holds a certificate enabling him/her to carry out activities relating to portfolio management.
The Securitisation Law also requires that the SPV places the underlying assets in the custody of, and accounted for, by a custodian bank pursuant to a custodian agreement. The provision of custodian services is also a licensed activity.
The NBK has amended the following legislative acts, which came into effect on 5 June 2006:
(a) Rules on Investment Portfolio Management. The amended provisions establish the procedure for the verification of the transferred assets of the SPV to a new management agent in case of the termination of the investment portfolio management agreement;
b) Rules on Custody Activity in the Securities Markets.
According to the amended Rules, in order to control the investment of an SPV’s assets, a custodian should open for the SPV both a separate investment account for the securities and a bank account for the monies generated from the invested securities.
The Rules also establish the procedure for the verification of the transferred assets of the SPV to a new custodian bank in case of the termination of the custodian agreement.
The NBK has also approved the typical forms of custodian agreements concluded between:
(i) the custodian bank, the management agent and the SPV;
(ii) the custodian bank and the SPV when the SPV is temporarily investing available funds generated from the underlying assets which it has invested itself.
It should be noted that the monies in the accounts in national (Tenge) and foreign currency, as well as the financial instruments referred to above, may not be the subject of any pledge, guarantee or other obligation of the management agent or of the SPV.