Tashkent, Uzbekistan (UzDaily.uz) — Uzbekistan’s National Agency for Perspective Projects (NAPP) has approved rules governing the circulation of foreign securities under a special regulatory sandbox regime. The regulation was registered by the Ministry of Justice on 11 November.
The document sets out procedures for trading foreign assets recorded by the Central Securities Depository, as well as financial instruments created on the basis of those assets.
The rules cover shares included in foreign stock indices, bonds issued by overseas companies and governments, exchange-traded funds (ETFs), index fund securities and depositary receipts issued by foreign companies.
Brokers and other investment intermediaries registered as participants in the capital market regulatory sandbox will be permitted to organise trading in these assets.
Transactions may take place on the Tashkent Stock Exchange or through an investment intermediary’s online platform in Uzbekistan. The rules also provide for access to foreign securities traded on overseas exchanges through intermediary platforms.
Only securities included in a special register after approval by NAPP may be admitted for trading. The agency plans to publish the register on its website, together with information about the securities and trading venues.
To qualify for inclusion, both the security and its issuer must be registered in a recognised foreign jurisdiction. The security must also be traded on a market with aggregate asset capitalisation of at least US$1 trillion.
Only individuals and legal entities with qualified investor status will be allowed to trade foreign securities and financial instruments based on them.
The regulation prohibits the purchase of foreign securities using borrowed funds. Legal entities are also barred from using currency conversion to finance such purchases. However, they may use foreign currency earnings from exports of goods and services.
For transactions involving financial instruments based on foreign securities, investment intermediaries must open separate foreign currency accounts with the agent bank of the Central Securities Depository. These accounts will be used to keep funds received from buyers separate.
Individuals may deposit cash in foreign currency at branches and offices of the agent bank or transfer funds directly from their own accounts to an intermediary’s account. Intermediaries are prohibited from accepting cash from individuals through their own cash desks or notaries.
The Central Securities Depository will also open a separate foreign currency account with the agent bank to clear and settle transactions.
The agent bank must notify the Central Bank and NAPP about movements in these accounts. Cross-border foreign currency transactions must be registered in the FERUz system no later than one business day after they are carried out.
The rules also establish procedures for distributing income and redeeming financial instruments. A foreign securities depository will notify the Central Securities Depository of dividend and interest payments or redemptions.
Based on these notifications, the Central Securities Depository will compile a list of registered holders of the instruments as of the relevant date.
Payments will be made through individual foreign currency accounts at the agent bank. Registered holders will be able to manage these accounts through the Central Securities Depository’s mobile application.
The Tashkent Stock Exchange and investment intermediaries must submit monthly reports to NAPP on transactions involving foreign securities.
The reports must be filed by the fifth day of the month following the reporting period.
