1. Electronic System of Comprehensive Information Disclosure (ESCRIN)
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) and EU Directives.
This system provides for the electronic filing of issue prospectuses, reports on placement of securities, annual reports, quarterly reports for each of the first three quarters of a year, and an extended list of 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 for the regulator, the investor community, and other market participants. Hence, ESCRIN, on the one hand, will make reporting easier for issuers, and will provide users with prompt and free access to such information, on the other hand.
2. Essence of the Pilot Project
The goal of the implementation of the pilot project is testing and further development of ESCRIN to insure a further standard introduction in Ukraine of the system of reporting for listed companies and strategic enterprises that will comply 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 will include 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.
The second stage of the Pilot project which will last from January to December, 2008 will involve the issuers of shares and bonds of the companies included in the listing of trade organizers as well as other issuers. The participating companies will disclose in a new extended format all types of information provided for by the Law of Ukraine On Securities and the Stock Market: annual and quarterly information, ad hoc information, issue prospectuses, reports on the results of placement of securities. In accordance with the ESCRIN requirements the structure and volume of information are 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.
3. 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 as well as for other issuers. Owing to their participation in the pilot project the company specialists will be 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 will come into force. Specifically, issuers will be 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 will be 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 will be 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 will be 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 will be 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 will acquire the skills in preparing annual information, quarterly information, issue prospectuses in accordance with international standards. It will enable a participating company to ease the process of making up documents, allow 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.
4. USAID Capital Markets Project
Capital Markets Project is a five-year program financed by USAID (US Agency for International Development). The Program is aimed at providing technical assistance to Ukraine for the development of a viable and efficient financial sector. Capital Markets Project was launched in October, 2005. One of the Project’s key targets is providing assistance to the Securities and Stock Market State Commission in the creation of an effective legal and institutional environment for the stock market operation meeting international standards and, accordingly, facilitating transparency and investment attractiveness of the country’s economy as a whole. The implementation of ESCRIN is one of the areas where the Securities and Stock Market State Commission and the Capital Markets Project collaborate in order to meet the above objectives.
5. Contact details and brief information on the team of experts that will work with the pilots
Under the terms of the agreement on Cooperation between the Securities and Stock Market State Commission and the USAID Capital Markets Project, involved in the implementation of the pilot project are the officials of the SSMSC Central and Regional Offices, as well as the following Capital Markets experts:
1. Victor Stetsenko – Senior Capital Markets Advisor
2. Olena Dorda – Chief Accounting Specialist
3. Tetiana Kotukhova – Head of the IT Department
4. Yaroslav Khvaleba – Senior IT Specialist
5. Yuliya Vitka – Capital Markets Lawyer
6. Olena Rudenko – Training Programs Coordinator.
Contact details of the Capital Markets Project:
04070, Ukraine, Kyiv
16А Borysohlibska St., office 1
telephone: (8-044) 467-78-71, 467–78-79, 467-78-89
fax: (8-044) 467–78-96
6. Guarantees of confidentiality and free-of-charge participation in the Pilot project
USAID Capital Markets Project guarantees confidentiality of company information on financial and business operations of the companies that it obtains in the course of the implementation of the pilot project. This will be ensured by a relevant tripartite confidentiality agreement with each of the participating companies. Parties to the agreement will be liable for violation of the confidentiality provision under the effective legislation.
USAID Capital Markets Project covers all the cost of the Pilot Project implementation. Participation of the companies in all the events under the pilot project, including training, consultations, system operating manuals, training materials, software tools and other advisory and technical support is free of charge.
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