Attached Open Letter from Mr. Bill Gorman who has completed his assignment at the MSE for the London Stock Exchange
BCM strongly supports the passing of the draft Securities Law in this session of Parliament. The MSE's development urgently requires this legislation on a timely basis.
Dear Ministers, Government officials and others interested in the Mongolian Securities Market’s modernization,
As I depart Mongolia, I feel duty bound to state that I strongly believe that successful and timely privatization of Erdenes Tavan Tolgoi (ETT) is dependent upon a proper Securities Markets law being promulgated by the current Parliament. My rationale is noted below. I have taken the liberty of copying those parties who have expressed interest in the draft law.
The current Securities Law is woefully deficient. It was built for a different time and different objectives than exist now. It was written with individual Mongolian citizen investors in mind and does not address the needs of institutional or foreign investors.
It does not recognize the difference between beneficial owner and registered owner. It makes no provision for Custodians (financial institutions with legal responsibility for an investor’s securities). It imposes requirements on companies “Listed” on the Mongolian Stock Exchange (MSE) that could make it difficult, if not impossible, for those companies to list their shares on other exchanges.
Without a proper law, ETT and other privatizations will encounter serious obstacles to their capital raising efforts and valuation of their shares because of deficiencies and limitations in the current Securities Markets Law. The MSE has always been vitally interested in helping draft a suitable law.
On September 1, 2011, I submitted in MSE’s name, a draft to the Securities Law Working Group. That draft contained contributions from several international legal firms and market participants and was reviewed by multiple local and international entities. Many of the persons on this e-mail’s courtesy-copy list were contributors to our submission. A very useful and near final review was performed by a securities market attorney at the World Bank. The Working Group has amalgamated the various submissions it has received.
I have not seen a full English language version of their current draft and have only reviewed and commented (in cooperation with the LSE/MSE team) on clauses 41 through 46 of their draft. I have been advised that a draft law has been scheduled for submission to Parliament during the Spring 2012 session. That session does not begin until April and ETT’s IPO (Initial Public Offering) is tentatively scheduled for March 2012. This late date poses several problems and is the reason I have written this e-mail. Mongolian Law will require ETT to list at least 10% of their shares on the MSE.
If a new Securities Markets Law is not promulgated in time, ETT may be caught in a legal bear trap (catch-22). Another problem is the Exchange’s need to promulgate a proper set of Listing Rules and Prospectus rules. These rules must conform to the requirements of the Securities Markets Law as well as be approved by both the MSE Board of Directors and the Financial Regulatory Commission. These time constraints could be managed if the Parliament were to pass the law in the current session.
A modern Securities Markets Law that attracts investors is needed regardless of political affiliation – it affects every Mongolian citizen. The current law does not meet Mongolia’s needs. It must be replaced if Mongolia’s dreams are to be met. May I recommend that the Government of Mongolia make a final review of its Draft State Securities Markets law and place it before the State Great Hural for passage in the current Parliamentary session.
Wishing everyone the best,
Bill Gorman
Source : Business Council of Mongolia
Dear Ministers, Government officials and others interested in the Mongolian Securities Market’s modernization,
As I depart Mongolia, I feel duty bound to state that I strongly believe that successful and timely privatization of Erdenes Tavan Tolgoi (ETT) is dependent upon a proper Securities Markets law being promulgated by the current Parliament. My rationale is noted below. I have taken the liberty of copying those parties who have expressed interest in the draft law.
The current Securities Law is woefully deficient. It was built for a different time and different objectives than exist now. It was written with individual Mongolian citizen investors in mind and does not address the needs of institutional or foreign investors.
It does not recognize the difference between beneficial owner and registered owner. It makes no provision for Custodians (financial institutions with legal responsibility for an investor’s securities). It imposes requirements on companies “Listed” on the Mongolian Stock Exchange (MSE) that could make it difficult, if not impossible, for those companies to list their shares on other exchanges.
Without a proper law, ETT and other privatizations will encounter serious obstacles to their capital raising efforts and valuation of their shares because of deficiencies and limitations in the current Securities Markets Law. The MSE has always been vitally interested in helping draft a suitable law.
On September 1, 2011, I submitted in MSE’s name, a draft to the Securities Law Working Group. That draft contained contributions from several international legal firms and market participants and was reviewed by multiple local and international entities. Many of the persons on this e-mail’s courtesy-copy list were contributors to our submission. A very useful and near final review was performed by a securities market attorney at the World Bank. The Working Group has amalgamated the various submissions it has received.
I have not seen a full English language version of their current draft and have only reviewed and commented (in cooperation with the LSE/MSE team) on clauses 41 through 46 of their draft. I have been advised that a draft law has been scheduled for submission to Parliament during the Spring 2012 session. That session does not begin until April and ETT’s IPO (Initial Public Offering) is tentatively scheduled for March 2012. This late date poses several problems and is the reason I have written this e-mail. Mongolian Law will require ETT to list at least 10% of their shares on the MSE.
If a new Securities Markets Law is not promulgated in time, ETT may be caught in a legal bear trap (catch-22). Another problem is the Exchange’s need to promulgate a proper set of Listing Rules and Prospectus rules. These rules must conform to the requirements of the Securities Markets Law as well as be approved by both the MSE Board of Directors and the Financial Regulatory Commission. These time constraints could be managed if the Parliament were to pass the law in the current session.
A modern Securities Markets Law that attracts investors is needed regardless of political affiliation – it affects every Mongolian citizen. The current law does not meet Mongolia’s needs. It must be replaced if Mongolia’s dreams are to be met. May I recommend that the Government of Mongolia make a final review of its Draft State Securities Markets law and place it before the State Great Hural for passage in the current Parliamentary session.
Wishing everyone the best,
Bill Gorman
Source : Business Council of Mongolia
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