With the support of the USAID Capital Markets Project, the
Securities and Stock Market State Commission
is developing a system for electronic disclosure of information aimed at setting up a basis for the effective cooperation of the regulator, issuers, investors and the general public (potential investors) in the area of preparation, filing and disclosure of information on the activity of the securities issuers in keeping with the requirements to information disclosure as established by the Securities and the Stock Market Law of Ukraine and in accordance with the international standards consolidated in the principles of the
International Organization of Securities Commissions (IOSCO)
This system provides for the electronic filing of annual reports, quarterly reports for each of the first three quarters of a year, and ad hoc information through Internet in a new extended format, as well as for the simultaneous free of charge online disclosure of such information on the SSMSC’s web-site
or the regulator, the investor community, and other market participants. Hence, ESCRIN, on the one hand, makes reporting easier for issuers, and provides users with prompt and free access to such information, on the other hand.
Pilot Project on Implementation of ESCRIN
The goal of the implementation of the pilot project was testing and further development of ESCRIN to insure a further standard introduction in Ukraine of the system of information disclosure for listed companies that complies with provisions of the Law of Ukraine On Securities and the Stock Market, best international practices and requirements of investors. ESCRIN provides for inputting reporting documents into the SSMSC database by issuers through Internet in a new suitable format exclusively in an electronic form. The implementation of the Pilot project included several stages, with a gradual increase in the number of issuers and the types of reporting data filed.
The first stage of the Pilot project was completed successfully in July, 2007. It provided for preparation and publication of annual reports of the issuers in keeping with the ESCRIN requirements. The first stage of the Pilot project involved 12 enterprises: AvtoKrAZ holding company, OJSC Motor Sich, OJSC Kyivmedpreparat, OJSC Kyivproekt, OJSC Zaporizhia production aluminum smelter, OJSC Slovvazhmash, OJSC Mariupol thermal plant, OJSC production and trading company Selena, OJSC Kalush motor transport enterprise, OJSC Fur company Tysmenyts’a, OJSC Kalush plant Budmash, OJSC Promprylad. Annual reports of the pilot project participants for 2006 have been prepared in accordance with the ESCRIN requirements and are made public on the SSMSC web-site: http://eds.ssmsc.gov.ua/.
The second stage of the Pilot project which lasted from January to December, 2008 involved the issuers of shares and bonds of the companies included in the listing of trade organizers as well as other issuers. The participating companies disclosed in a new extended format all types of information provided for by the Law of Ukraine On Securities and the Stock Market: annual, quarterly and ad hoc information. In accordance with the ESCRIN requirements the structure and volume of information were aimed at making understanding the issuer’s financial and commercial position by investors and shareholders easier.
In order to gradually adapt the issuers to new standards of information disclosure the SSMSC central office and its regional offices have planned to hold training seminars, round tables, individual working meetings within the framework of the pilot project.
However, it should be noted that the participation in the second stage of the pilot project does not exempt the participating companies from the mandatory obligation to file with SSMSC the information to be disclosed under the procedure established by the effective SSMSC regulations.
Benefits for the companies participating in the pilot project
1. It is expected that the system improved based on the results of the pilot project will be introduced by an SSMSC regulation as mandatory for the issuers of shares and bonds of the companies included in the listing of trade organizers. Owing to their participation in the pilot project the company specialists have been able already at this stage to receive consultations and learn to draw up reporting information even before introducing the system as mandatory.
Hence, by the time ESCRIN becomes mandatory under the Securities and Stock Market State Commission regulation, the participating companies will be prepared, both technically and professionally, to file business reports and financial statements in keeping with the new SSMSC requirements.
2. From January 1, 2008 an obligation to disclose annual information in keeping with the new requirements provided for by Regulation of information disclosure by securities issuers approved by SSMSC resolution of December 19, 2006, 1591 came into force. Specifically, issuers are obliged to disclose their annual information in accordance with the new requirements in the Public SSMSC information database not later than April 30, 2008. Having prepared annual information within the pilot project specialists of a participating company were able to prepare such information in keeping with the new SSMSC requirements and disclose it in the
Public SSMSC information database.
3. In the ESCRIN system all reporting information is submitted by issuers exclusively in an electronic form. After the introduction of the system as mandatory it is expected that verification of the data in an electronic document will take place using an electronic digital signature. Owing to participation in the Pilot project specialists of the participating companies were able even before the introduction of electronic document circulation with SSMSC as mandatory to learn free of charge to use and apply the electronic signature.
4. The forms of annual reporting which were filled in the course of the Pilot project were developed with due regard to the best international practices. Owing to their participation in the Pilot project specialists of a participating company acquired the skills in preparing annual information, quarterly and ad hoc information in accordance with international standards. It enabled a participating company to ease the process of making up documents, allowed it to reduce the cost of their preparation in the future, in particular, when entering international securities markets with IPO too.
If required, the documents prepared may be used in a rating procedure and serve as one of the sources of information on the basis of an analysis thereof a credit rating is assigned to the issuer. Also, information transparency of the company will facilitate the formation of a liquid market of company shares, enhancement of its market capitalization and is an important factor of determining a fair value of the company.
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