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. Last Updated: 07/27/2016

Tight Rules for Kazakh Brokers

ALMATY, Kazakhstan -- Oil-rich Kazakhstan, which plans to form a viable shares market this year, says players in the yet-to-be-formed market must meet tough standards to win investor confidence.


National Securities Commission chairman Grigory Marchenko told a news conference Wednesday that he would be hard on Kazakh brokers and dealing firms which did not boost their capital to $130,000 by April 15 from $70,000 at present.


"Starting April 15, the minimum capital of broker and dealer companies should rise to $130,000, and this measure may cut the number of these companies to 15 to 20 from today's 75," he said.


Kazakhstan has already set up a new stock exchange and designated 56 local firms in the energy and processing sectors as blue chip companies.


Marchenko said the government was negotiating with leading accounting companies, including Arthur Andersen, KPMG, Ernst & Young, Deloitte & Touche, Price Waterhouse and Coopers & Lybrand, on terms for auditing the blue chips.


The Kazakh government plans to complete work on a central share depository and on bank custodians for domestic securities by May, and has scheduled an investment conference in June where the oil-rich republic's blue chip companies can meet major foreign investors.


"On June 18 to 20 ... Kazakhstan will hold a conference for investors. We expect active participation of foreigners wishing to invest in our market," said Marchenko.


He said the European Bank for Reconstruction and Development and the International Finance Corporation -- a commercial unit of the World Bank -- had helped organize the conference.


"This is the first serious event for foreign investors on Kazakhstan's stock market," he said.


Marchenko said the Kazakh government expected 25 investment banks from the West and the Far East, as well as at least 50 foreign institutional investors, such as investment and pension funds, to take part.


The government has hopes that the stock market will be fully operational by the end of the year.


Marchenko, a former deputy head of the Kazakh Central Bank, said the main purpose for the new rules was to ensure that poorly capitalized brokers and dealers did not abuse peoples' savings or shatter their trust in economic reform.


"If you yourself have not earned enough money, why should people trust you?" he asked.


He said the changes were needed to attract serious foreign investors to the blue chip firms forming the core of the market.


He did not exclude even tougher capitalization rules in the future. "No foreign investors will work with the dealer whose capital is less than $1 million," he said.


All companies slated for sell-offs to portfolio investors on the stock market must undergo international auditing for 1996 and bring accountancy into line with international standards.


"Our policy is to protect investors. ... We are interested in the maximum transparency of all information for potential investors," Marchenko said.


Next year's planned reform of Kazakhstan's national pension scheme would also help develop the stock market.


Private pension funds must replace the present-day bankrupt state pension fund within 10 years and accumulate pension fees from individuals. Special companies would manage their assets.