DRAFT 24 August 2010

LAW OF MONGOLIA

ON SECURITIES MARKET(Revised version)

CHAPTER ONE

GENERAL PROVISIONS

Sub-chapter one

General provisions

Article 1. Purpose of Law

1.1. The purpose of this Law is to regulate the creation of a fair, transparent, efficient and regulated securities market which protects the investor’s interests, mitigates market risk through regulation and review of the securities market.

Article 2. Legislation on Securities Market

2.1. The legislation on the securities market consists of the Constitution of Mongolia, Civil Code, Company Law, Banking Law, Law on Securities Secured by Property, Law on Licensing of Business Activities, Law on Auditing, Law on State Supervision and Control, Law on Accounting and the present law and other legislative acts adopted in conformity with thereof.

2.2. If an international treaty to which Mongolia is a party provides otherwise, the provisions of the international treaty shall prevail.

Article 3. Scope of this Law

3.1 This law regulates relations related to the activities specified in Article 23 of this Law on the basis of a special license granted by the Financial Regulatory Commission (“Commission”).

3.2. Unless otherwise provided in this Law, specific regulation related to the issuance and trading of securities secured by property shall be found in the law on Securities Secured by Property. 3.3. Detailed relations regarding the conduct of investment fund activities shall be regulated by this Law and a special law adopted in conformity with thereof.

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3.4. Relations regarding the conduct of activities in the securities market secured by private and state pension fund assets shall be regulated a by special law which regulates such relations.

3.5. Relations regarding the issuance and trading of derivative securities on the securities market shall be regulated by this Law and a special law adopted in conformity with thereof.

3.6. The activities of a legal person that is conducting banking, non-banking [financial] and insurance activities shall be regulate by this Law and other relations shall be regulated by legislation specifically designed for each activities.

4.1. Definitions of legal terms

4.1. In this Law, the below mentioned terms shall have the following meaning:

4.1.1. “securities market” means regulated market with permanent operation, which centrally conducts the selling and purchasing of securities;

4.1.2. “securities” means financial instrument defined in Article 5 of this Law;

4.1.3. “debt instrument” means a security which certifies the obligation to repay the principal and interest in the form of cash, or certain property, or property rights after a certain period of time;

4.1.4. “derivative” or “derivative instrument” means a derivative or a derivative financial instruments such as options, futures, swaps and forward that are issued based on certain securities, securities convertibility index, or certain commodities;

4.1.5. “option” means a security which certifies the right to demand the sell or redemption of a certain number of shares of a certain company within a specifically determined period of time;

4.1.6. “futures” means a contract with conditions to supply a certain amount of product at an agreed price within a determined period of time, or to transfer certain products at an agreed price regardless of the difference [between] the price at the conclusion of the agreement and the future price;

4.1.7. “depository receipt” means a security which certifies the right of the person who holds a depository receipt to enjoy the right under the principal securities of such depository receipt;

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4.1.8. “principal securities” means shares registered with a stock exchange of a country other than the one which issued depository receipt;

4.1.9. “securities prospectus” means an prospectus and supporting documents related to it for the purpose of selling securities through public offering or specific persons, prepared in accordance with the procedures specified in the legislation on securities;

4.1.10. “securities participant” means a person conducting regulated activities, professionals, securities issuer, investors, customers and securities holder;

4.1.11. “regulated activity” means activities specified in Article 27 of this Law;

4.1.12. “regulated person” means a person who is granted a special license or right to conduct regulated activities by the Commission in accordance with the Sub-chapter 5 of this Law;

4.1.13. “securities broker” means a legal person that is granted a special license to conduct activities specified in Article 35 of this Law;

4.1.14. “dealer” means a legal person that acquired special license to conduct activities specified in Article 36 of this Law;

4.1.15. “securities advisor” means a legal person that acquired special license to conduct activities specified in Article 37 of this Law;

4.1.16. “securities manager” means a legal person that is granted a special license to conduct activities specified in Article 38 of this Law;

4.1.17. “underwriter” means a legal person that is granted a special license to conduct activities specified in Article 39 of this Law;

4.1.18. “securities registrar” means a legal person that is granted a special license to conduct activities specified in Article 40 of this Law;

4.1.19. “securities trade clearing organization” means a legal person that is granted a special license to conduct activities specified in Article 41 of this Law;

4.1.20. “securities trade payment clearing organization” means a legal person that is granted a special license to conduct activities specified in Article 42 of this Law;

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4.1.21. “securities depository organization” means a legal person that is granted special license to conduct activities specified in Article 43 of this Law;

4.1.22. “custodian” means a legal person that is granted a special license to conduct activities specified in Article 44 of this Law;

4.1.23. “stock exchange” means a legal person that is granted a special license to conduct activities specified in Article 45 of this Law;

4.1.24. “eligible person” means a person determined in accordance with the Article 70 of this Law;

4.1.25. “customer’ means a person being served, on the basis of the contract, by a regulated person with particular rights which specified in this Law;

4.1.26. “professional investor” means a legal person with a right to conduct activities of a dealer, underwriter and investment fund at the securities market, or legal person determined by the Commission as professional investor;

4.1.27. “securities issuer” means a legal person who have registered with the Commission to sell its securities in the securities market;

4.1.28. “registration of publicly offered securities” means the registration of securities by the Commission to publicly offer in accordance with the procedures specified in this Law;

4.1.29. “registration of securities ownership” means the registration of securities carried out by the authorized securities registrar under the procedures specified in Article 40 of this Law;

4.1.30. “registration with the stock exchange” means registration of the securities permitted to be traded on a stock exchange;

4.1.31. “margin” or “pledge assets required for the purchase of securities through a loan” means money and securities deposited in a special account as a pledge in the event the customer purchases securities through a broker’s loan;

4.1.32. “position” or “guaranteed right and obligation” means an obligation to sell or purchase a certain amount of securities, an amount of a certain type of securities owned by the particular person;

4.1.33. “influential shareholder” means a shareholder who holds 5 percent or more of a company’s total issued shares with voting rights, alone or with relevant person, or a shareholder who is exercising the voting right on the basis of agreement;

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4.1.34. “affiliated person” means:

4.1.34.1. as for the individual person, his wife, husband, son, daughter, adopted or step son, daughter, brother-in-law, sister-in-law, father of a daughter-in-law, parents, step parents, brother, sister, young brother and sister, brother and sisters with same father or mother;

4.1.34.2. company in which the person works as director;

4.1.34.3. company of which any of the person specified in paragraph “4.1.34.1” of this section holds 20 or more percent of the voting rights;

4.1.34.4. as for the employer, an employee;

4.1.34.5. as for the company, its controlled, subsidiary and twin company.

4.1.35. “union of regulated persons” means legal entities having the following relationship to the regulated persons:

4.1.35.1. Parent company, partnership and other legal entity of regulated persons;

4.1.35. 2. Controlled and subsidiary company, partnership, and other legal entity of regulated persons;

4.1.35. 3. Controlled and subsidiary company, partnership and other legal entity of regulated persons parent company;

4.1.35.4. Predominant company and other legal entity of regulated persons controlled and subsidiary company;

4.1.35.5. Person who is holding the control package of the legal entities of regulated persons specified in 4.1.35.1-4.1.35.5;

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CHAPTER TWO

ISSUANCE AND TRADING OF SECURITIES

Sub-chapter two

Issuing of Securities

Article 5. Securities

5.1. The following financial instruments shall be considered as securities regulated by this Law:

5.1.1. common and preferred shares constituting the shareholder’s equity of the joint stock company registered with stock exchange (“shares”);

5.1.2. bond issued by a company;

5.1.3. bond issued by the Government and Governors of the aimag and capital city;

5.1.4. bond with maturity of more than one year and issued by Central Bank;

5.1.5. the right to order a certain number of shares and debt instruments or warrants, within certain period of time and at an agreed price, offered by the securities issuing company to investors;

5.1.6. the right or option to sell and purchase securities;

5.1.7. futures agreement related to the indexing of securities and shares;

5.1.8. a unit right in a mutual fund and shares of the investment company; 5.1.9. depository receipt;

5.1.10. other financial instruments considered by the Commission as securities in accordance with this Law.

5.2. The following instruments shall not be considered as securities regulated by this Law:

5.2.1. securities of a limited liability company;

5.2.2. futures agreement not related to the indexing of the shares and securities;

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5.2.3. bills of exchange and basic promissory notes;

5.2.4. depository certificates issued by a bank;

5.2.5. other securities with a maturity less than one year issued by a commercial banks to be trade in a monetary market under Article 15.2 of the Banking Law.

Article 6. securities issuer

6.1. A legal entity conducting activities for profit may issue securities under Company law and this Law.

6.2. Shares may be issued in the securities market only by a joint stock company registered with the stock exchange.

6.3. The Government and Bank of Mongolia may issue securities offered to the public with the permission of the State Great Khural and the Governors of aimag and capital city may issue securities offered to the public with the permission of the Citizens’ Representatives Khural.

Article 7. Order of the Securities issuance procedure

7.1. Unless otherwise provided in legislation, securities shall be issued on the primary securities market according to the following order:

7.1.1. the authorized body of a securities issuer shall make a decision to issue securities;

7.1.2. [the securities issuer] make the preparation work to issue securities and to develop the securities prospectus and the supporting documents;

7.1.3. the authorized body of the securities issuer shall approve the documents and the draft prospectus specified in section 7.1.2 of this Law

7.1.4. the Security issuer shall register its securities at registration of publicly offered securities of the Commission and obtain permission to offer its securities to public;

7.1.5. [Security issuer] shall be registered at registration of securities ownership;

7.1.6. [Security issuer] register its securities and offer its securities to

public;

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7.1.7. sell securities on the securities primary market pursuant to permission granted by the Commission;

7.1.8. submit a report and documents on the issuance of securities to the Commission and stock exchange according to the relevant procedures and inform the public.

7.2. The regulation on the making of decision to issue bond from Government, aimag and capital city shall be approved by the Government, the regulation on the making of a decision to issue securities from the Bank of Mongolia shall be approved by the Bank of Mongolia respectively.

Article 8. Registration of the Securities

8.1. Unless otherwise mentioned in law, registration of publicly offered securities and approval of the securities introduction shall be done solely by the Commission.

8.2. The general regulation of the registration of publicly offered securities and approval of the securities introduction shall be established by the Commission.

8.3. Special procedures to register bonds, securities secured by property, and derivative securities of the Government, the Bank of Mongolia, aimag and capital city permitted for public offering shall be established by the Commission.

8.4. The Commission shall make a decision on registration [of publicly offered securities] within 30 business days after receiving a request for registration of [publicly offered] securities other than those specified in Article 8.3 of this Law. In the event additional materials are required, the Commission may extend the registration decision making period up to 30 days.

8.5. Unless otherwise mentioned in legislation additional securities shall be registered in accordance with the procedures provided for in this Article.

8.6. Unless otherwise mentioned in law, additional securities, to be sold through a closed sale, of the legal entity that previously issued publicly offered securities shall be registered in accordance with the general procedures specified in this Law.

8.7. The securities issuer shall be responsible for the accuracy of the information specified in the application to register securities and damages incurred to others caused from the foregoing inaccurate information.

8.8. The Commission shall not be liable for any loss incurred due to the purchase of securities [by a person] and the registration of publicly offered securities by the Commission shall not be considered as any guarantee by the Commission.

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8.9. In the event the an application to register securities [with the Commission] was not submitted in accordance with appropriate procedures, or does not satisfy prescribed requirements, or the required information was not included in the application, or the application included incomplete information, or information included in the application was contradictory, or the application included false information and additional information requested by the Commission have not been submitted in a timely manner, or the registration of the securities might negatively affect the public interest, the Commission shall refuse to register such securities.

8.10. If the securities issuer deems it necessary, the securities issuer may submit a request to obtain registration of publicly offered securities to the Commission, together with the [application] request to register with the stock exchange. Registration of the securities at stock exchange before a decision [to register security and grant permission to offer securities to public] has been made by the Commission shall not be ground to offering of securities to public.

Article 9. Securities prospectus

9.1. The securities prospectus shall be valid for a period of six month after its approval by the Commission. During this period the securities shall be offered to public on the basis of the securities prospectus of such securities and it is prohibited to publicly offer securities after the expiry of the validity period [of the securities prospectus.

9.2. If the securities prospectus has not been re-approved after the expiry of the period specified in Article 9.1 of this Law, after six months from the expiry of [the period specified in Article 9.1] such period, the registration of such securities shall be revoked by the Commission.

9.3. Detailed regulation on the securities issuer, requirements and forms of the securities introduction and the preparation of the securities introduction shall be established by the Commission.

9.4. The securities prospectus shall include (1) all the required information such about securities issuer, (2) its shareholders, (3) management, (4) structure, governing person, asset, debt and financial capacity of the securities issuer, current and future potential risks, securities being issued, rights certified by such securities, regulation to sell securities, and third party opinions and assessments.

9.5. The securities introduction shall mandatorily include the the following information:

9.5.1. the proper name, permanent address as well as about the activities being conducted [by the securities issuer], and whether [the securities issuer] is registration with the stock exchange;

9.5.2. a copy of the securities issuer’s state registration certificate for legal entity;

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9.5.3. the full name of a shareholder holding more than 5 percent of the total voting shares issued by the securities issuer, the amount and percentage of the shares held by the shareholder alone or jointly with any affiliated person;

9.5.4. about the structure, organization and governing person of the securities issuer, and the amount and percentage of shares [of the securities issuer] owned for the last 3 years;

9.5.5. the amount of owner’s equity of securities issuer (charter fund), the amount and nominal value of previously issued securities, the amount of [the securities issuer’s] own assets and tangible and intangible asset;

9.5.6. the balance sheets, debt and loan assessment for the last 3 years which has been reviewed and approved by an auditing organization;

9.5.7. about agreements and contracts to which the securities issuer is obliged with a value that equals five and ……… percent of its registered capital and about [the securities issuer] implementation of the payment obligation which equals five and ……… percent of its registered capital;,

9.5.8. about the persons related to securities issuer or other relevant person;

9.5.9. the number, form and nominal value of the publicly offered securities, the conditions and the procedures to offer or sell securities to the public, and the procedures for distributing dividends (interest as for bond);

9.5.10. a plan to use investments earned from the sale of the publicly offered securities;

9.5.11. about the procedures to convert such securities into shares if applicable;

9.5.12. about the activities of the securities issuer and the price risk to such securities;

9.5.13. about regulated persons cooperating in the activities of publicly offering such securities or providing professional services, contract concluded with regulated persons, mutual rights, obligations and liabilities with regulated persons;

9.5.14. as for debt instruments, about guarantees and pledge property to repay;

9.5.15. others.

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9.6. The methodologies and procedures to determine the selling price of publicly offered securities, the securities issuer’s financial statement for the last 3 years as audited by an auditing organization, and the financial statement for the preceding quarter and month prior to submission of the registration request to the Commission shall be inseparable part of the securities introduction.

9.7. In the information reflected in the securities introduction, if the assessment and opinion of the third party expert or professional is included, the following information and supporting document should be attached to the securities introduction:

9.7.1. the name, address and experience of the expert issuing such opinion;

9.7.2. the guarantee issued by the expert that such opinion was issued under the relevant procedures and without any conflict of interest;

9.7.3. permission [from the expert or professional] not to refuse the public disclosure of such opinion in the securities introduction.

9.8. Additional information that shall be reflected in the prospectus other than those mentioned in Articles 9.4-9.5 of this Law shall be determined by the Commission.

9.9. The Chairman of the board of directors and executive director representing the securities issuer shall sign the request [application], the securities introduction and the copies of the [supporting] documents.

9.10. The securities issuer is prohibited from making any changes in the securities introduction as approved by the Commission without the permission of the Commission.

9.11. An interested party [person] may make a request to the Commission to determine if the securities introduction offered to public is copy approved by the Commission.

9.12. In the the following circumstances, the securities introduction shall not be required:

9.12.1. Government bond, the Bank of Mongolia securities;

9.12.2. securities on which Government guarantee is fully issued;

9.12.3. in the case of consolidation and splitting of shares;

9.12.4. converting a convertible bond into shares;

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9.12.5. issuing securities to all shareholders for free;

9.12.6. other circumstances prescribed by legislation.

9.13. Special procedures regarding the registration of publicly offered securities specified in Article 9.12 of this Law shall be established by the Commission.

Article 10. Public offering of the securities

10.1. The public offer of securities shall be construed as being activities to introduce and advertise securities to the following persons by a securities issuer whether issued alone or with the support of a authorized regulated person for the purpose of selling them on the primary securities market:

10.1.1. to offer to fifty (50) or more specific purchasers or investor in a closed manner;

10.1.2. to freely offer public.

10.2. The securities shall be offered to the public only within the scope registered with the Commission and on the basis of the prospectus approved with the Commission.

10.3. The securities issuer during the process of offering its securities to public shall provide any interested person with an opportunity to obtain the securities introduction free of charge.

10.4. In the event the Commission required additional information from the securities issuer, or it has been proven that the securities issuer misled, provided inaccurate or incomplete information during the registration of securities, or publicly introduced securities, or misled, or gave false promises on the basis of such information, the Commission may suspend such public offering of securities or may revoke the registration.

10.5. The securities issuer shall be held liable for the expenses and other damages arisen in connection with the revocation of the registration of publicly offered securities as provided in Article 10.4 of this Law due to guilty activities of the securities issuer.

10.6. An underwriter, or the auditor, the assessor, and the lawyer who issues a false or incomplete opinion shall be held jointly liable for the damage caused when worked jointly when a violation was committed as specified in Article 10.4 of this Law.

10.7. Damages specified in Article 10.5 and 10.6 of this Law shall be claimed through the courts.

10.8. It is prohibited to publicly offer shares not registered and to publicly offer shares of a limited liability company.

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Article 11. Selling of securities on the primary market, and reporting

11.1. Only securities registered with at the Commission and permitted for public offering and registration of the stock exchange shall be sold on the securities primary market.

11.2. In order to trade securities in the securities primary market, the Security issuer shall be registered at the relevant stock exchange and on the basis of the request made by the stock exchange, the Commission shall issue permission to sell the securities at securities primary market.

11.3. It is prohibited to sell securities through a loan at the securities primary market.

11.4. The securities issuer shall submit a report regarding primary market securities sales transactions to the Commission within 3 days of conclusion of the sale of securities. The information to be reflected in the report shall be determined by the Commission.

11.5. In the primary market securities trade report, the conclusion of the authorized trading organization1 that organized such transaction shall be attached.

11.6. The Commission shall review the primary market securities trade report within 10 days and if no violation is found, or considered that the trading of [the securities] on the primary market was successful, the Commission shall issue permission to start the trading on the secondary market and to open rights of the securities issuer to dispose the proceeds of the securities sale.

11.7. The Commission shall consider that the primary market trading was successful under the following circumstances:

11.7.1. in the case of securities issued at nominal value, all the shares offered to public was sold or payment for the purchase of securities has been paid;

11.7.2. in the case of securities sold at a value other than the nominal value, the investment required for the execution of the work and services specified in the securities prospectus which was introduced to the public, has been completely generated/gathered;

11.7.3. if there is an underwriter, the underwriter has paid the necessary payment in full or created the conditions specified in Article 11.7.1 and 11.7.2.

1 The law uses the terms “trading organization”, “securities trading organization” and “stock exchange” interchangeably to mean the same organization.

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11.8. Until the decision of the Commission specified in Article 11.6 of this Law is issued, the securities issuer shall not have the right to own or dispose of the proceeds from the securities sale.

11.9. In order to successfully conduct the trade and purchase activity of the securities [traded in the] primary market, the Commission or stock exchange may demand the securities issuer to open a special account with an authorized savings organization and transfer the proceeds required for the satisfaction of obligation implementation into it in advance for the purpose of satisfying the obligation implementation of the person who made the relevant offer.

11.10. Article 11.9 of this Law shall equally apply to the underwriter.

11.11. The proceeds generated through the selling of securities shall be spent for the purpose specified in the securities introduction and if [the Commission and the stock exchange???] deems it necessary, the Commission or the stock exchange may put restriction on the disposal of the proceeds generated from the securities sale in accordance with a certain schedule.

11.12. In the event the securities are not sold on the primary market within 1 year after being registered at registration of publicly offered securities by the Commission, the registration of such securities shall be revoked [by the Commission].

Article 12. Depository receipt

12.1. A legal person who has a right to issue shares in the securities market may issue depository receipts.

12.2. The Depository receipt shall have the following types:

12.2.1. Mongolian Depository Receipt;

12.2.2. International Depository Receipt.

12.3. Mongolian Depository Receipt shall be understood as dual/simultaneous trading of primary securities registered with the stock exchange in the territory of Mongolia in the form of depository receipt on the securities market of other countries.

12.4. International Depository Receipt shall be understood as trading of principal securities registered with a foreign stock exchange at a stock exchange located in the territory of Mongolia through issuing of a depository receipt. The International Depository Receipt may have specific name.

12.5. Security issuer may issue depository receipt through concluding agreement with custodian who has special permission from the Commission.

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12.6. When trading International Depository Receipt in the territory of Mongolia, the securities issuer shall inform the [Mongolian] public of the differences between the laws and regulations of countries [Mongolia and other country]and the securities issuer shall take all measures required for providing equal rights to the owners of principal securities and the owner of the International Depository Receipt issued on the basis of such [principal] securities.

12.7. The Commission shall determine the list of securities on which Depository receipt may be issued on the basis of the proposal of the stock exchange.

12.8. The Commission shall determine the regulation on the issuance and registration of a depository receipt related to the registration of publicly offered securities and grant of permission [to whom] to sell.

Article 13. Company bond

13.1. A company which meets the relevant requirements may issue bond.

13.2. A company bond shall have a re-payment pledge or third party guarantee.

13.3. The detailed regulation on the requirements for a company to issue a bond, registration of the bond and its public offering shall be determined by the Commission.

13.4. The stock exchange, without undermining the requirements determined by the Commission, may determine its own requirement.

Article 14. Issuing of securities in a foreign country by the company registered in Mongolia

14.1. A company that initially registered its securities with the stock exchange operating in the territory of Mongolia may issue securities which equal up to 90 percent of its total issued securities in the securities market of a foreign country.

14.2. Company specified in Article 14.1 of this Law, when issuing securities in the securities market of the foreign country, shall obtain permission from the Commission.

14.3. The Commission shall determine the procedures to issue permission specified in Article 14.1 of this Law.

Article 15. Issuing of securities in Mongolia by the legal entity registered in Foreign company

15.1. A legal entity that initially registered in any stock exchange of a foreign country, may register or sell its securities with the stock exchange operating in the territory of Mongolia with the permission of the Commission.

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15.2. When selling its securities [with a stock exchange within the territory of Mongolia], a foreign legal entity is required to reflect [1] the similarities and differences between the legislation of its own country and Mongolia in its securities prospectus. The securities prospectus shall also include [2] regulation which provides shareholders a possibility to exercise their rights and [3] potential risk arisen from the differences of legislations of countries.

15.3. The regulation to issue permission specified in Article 15.1 of this Law and requirements for the securities issuer shall be determined by the Commission.

Article 16. Issuing of derivative securities

16.1. A authorized person eligible to conduct securities dealing activities may issue derivative securities.

16.2. The derivative securities shall be sold within scope of persons who has authorized to conduct the activities of the securities broker, dealer, underwriter, investment fund and professional investors at the securities market.

Article 17. General obligation of the securities issuer

17.1. The securities issuer shall have the following general obligations:

17.1.1. to make the decision to issue securities by the meeting of its authorized organization, and to issue securities in accordance with the relevant procedures;

17.1.2. to submit/deliver a report and information related to the securities issuer and trading of its issued securities, in accordance with relevant methodology and forms within specified period;

17.1.3. to have more than 2 independent members in its Board of Directors;

17.1.4. to appoint and employ eligible person as governing persons;

17.1.5. to spend the proceeds generated through the sale of the securities on the primary market only for the purpose specified in the securities introduction, and in the event the implementation of the project changes from the schedule specified in the securities introduction, to inform public and shareholders from time to time;

17.1.6. to submit a semi-annual, and annual financial balance sheet, approved by an approved audit organization to the Commission and the stock exchange within the period specified in Article 13 of the Law on Accounting2;

2 Law on Accounting - published at “State Information” bulletin, No.1, 2002

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17.1.7. to publish the abstract of the financial balance sheet together with the auditor’s opinion through the press and media according to the procedures determined by the Commission;

17.1.8. a joint stock company, with registered securities, shall submit to the Commission materials from a regular shareholders meeting together with its decision before 1 June, and irregular meeting materials within 20 days after the holding of the meeting;

17.1.9. to implement the principles of company governance approved by the Commission.

17.2. The Securities Commission shall determine the procedures on information on market prices of securities, trading amount, information possible to influence the process and on distribution of information to the public.

Article 18. Demanding of information related to securities issuer

18.1. In the event of the the following circumstances, or if deemed such circumstances might be created, the Commission within a defined period of time and using appropriate means and methods is entitled to demand information from the securities issuer and other person related to the securities issue:

18.1.1. conducted or conducting deceiving, defrauding or other illegal activities of its own or others’ obligation implementer, or unfairly dealt with shareholders;

18.1.2. established the company for the purpose of deceit, defraud or other illegal intention;

18.1.3. the founder and the authorized official of the company, when founding the company or implementing the management, deceived the company or its shareholders, or conducted other illegal activities;

18.1.4. failed to deliver the information that should be delivered to the shareholders.

18.2. The Commission may execute the implementation of rights specified in Article 18.1 of this Law through the Commission’s inspection officer.

18.3. The Commission and the inspection officer authorized by the Commission are entitled to demand the information specified in Article 18.1 of this Law from any person, which is deemed to possessed such information.

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18.4. In the rights specified in Article 18.1 of this Law, the rights such as to obtain copies of the documents, to obtain the original copy of all or some parts deemed necessary, to have explanations made by person who worked or are working in the company, and if some documents are not provided, to demand realistic information from the person who is obliged to provide such information, place and person the information is held shall be equally apply.

Article 19. Making of a claim with the court about the illegal activities of the securities issuer

19.1. The Commission shall make claims on behalf of shareholders with the

court, [1] if the Commission deems that the securities issuer or its governing person damaged the interests of the shareholders by conducting an illegal activity or [2] if the Commission deems that court claim is necessary required.

19.2. The Court shall issue the following decision if it considers that the securities issuer or its authorized official caused damage to the company or shareholders:

19.2.1. to stop the activity causing damage;

19.2.2. to take measures required for the remedy of the violated right in accordance with the condition specified in the court decision;

19.2.3. to appoint a receiver of right or a custodian of the asset, to determine their rights and obligations, and to define the amount of salary and incentives of a receiver and custodian; and

19.2.4. to order the company or certain shareholders to purchase the shares from other shareholders, in the event the company makes the purchase, to make a decision deemed appropriate for the regulation of the company’s future activities, such as to decrease the shareholders’ asset or divide or liquidate the company etc.,

19.3. If amendments were made to the company’s charter by a court decision, it shall be prohibited to make any changes and amendments into the charter which contradicts with the said decision.

Article 20. Giving of assignment to securities issuer

20.1. The Commission may issue an assignment to securities issuer requiring it to take certain measures within a deadline for the purpose of ensuring the implementation of the legislation, correcting a violation, intercepting the illegal activities, and protecting the investors’ interest.

20.2 The Company which received the assignment specified in Article 20.1 of this

Law is obliged to implement it.

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20.3. The Commission may have the assignment implemented through a complaint filed with the court about the company and its official those failed to implement the assignment specified in Article 20.1 of this Law.

Sub-chapter three

Making of an offer to purchase a company

Article 21. Making of an offer to purchase a company

21.1. Offer to purchase a company shall be made in accordance with this Law and regulations prescribed by this Law.

21.2. An offer to purchase a company shall be made in the following form:

21.2.1. making of an offer to purchase the shares of the company by a shareholder of the company alone or jointly with the affiliated person, or person who does not hold any shares of the company, all or part of the shares of the company on the voluntary basis;

21.2.2. compulsory offer by the shareholder, who purchased the controlling block of shares of the company alone or jointly with affiliated person, to purchase all the remaining shares of the company for the purpose of exercising obligation specified in the Company Law.

21.3. A person who makes an offer to purchase the company shall inform the Commission of the offer and obtain [the Commission’s] permission.

21.4. A person who makes an offer to purchase the company, when offering the shareholders to purchase the shares of the company, shall comply with the procedures specified in the Company Law, and provide any persons with information related to such purchase.

21.5. The following information should be provided to the public regarding the purchase of the Company:

21.5.1. the name of the offeror to purchase the company;

21.5.2. the number and amount of total shares being offered to purchase and the minimum price of a single share;

21.5.3. the financial resource purchase the shares;

21.5.4. project and proposal to develop the company.

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21.6. The minimum validity period of an offer to purchase the company shall be 2 months and maximum period shall be 6 months.

21.7. The price, offered by the offeror to purchase the company, the share [price] shall be determined in an amount not less than the higher of the average value of the share in the last 6 months, or if offeror is a shareholder, then the maximum purchase value purchased the share of the company by the offeror, and such value shall not be less than the nominal price of such shares.

21.8. An offeror to purchase the Company, when making an application requesting the offer of purchase, shill inform a shareholder who is holding more than 5 percent of the total shares of such company and board of directors of the company of the offeror’s offer.

Article 22. Activities of purchasing the company

22.1. The Commission shall determine the regulation on making an offer to purchase the company and activities related to it.

22.2. The following may be included in the regulation specified in Article 22.1 of this Law:

22.2.1. the method and form of making an offer;

22.2.2. the request to register the offer, permit or refuse to permit;

22.2.3. procedures to inform the public of the offer;

22.2.4. measures to be taken by the company’s management in relation to the purchase offer;

22.2.5. the rights, obligations and liabilities of the participant parties in the offer making activities;

22.2.6. the content of the offer to purchase the company document and the period to introduce or inform [the shareholders of the company];

22.2.7. period of offering activities;

22.2.8. limitation on the trading before and during the process of offering;

22.2.9. guarantee to implement the purchase activity;

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22.2.10. inspection of the activities of the securities broker, securities advisor, employees of the company, the offeror and/or other persons participating in the activities;

22.2.11. to issue demand to parties participating in the offer making activities;

22.2.12. the powers of the Commission to dismiss any one of the parties from certain requirements or obligations specified in laws and regulations adopted by the Commission;

22.2.13. information to the public about the influential shareholders;

22.2.14. prohibitions of the activities of purchasing the company;

22.2.15. other issues considered by the Commission required for properly conducting the activities of purchasing a company.

22.3. It is prohibited to make a purchase offer in violation of the regulations adopted by the Commission, or conduct any activities directed at purchasing the company without making an offer.

22.4. If the person who has an obligation to mandatorily purchase all the voting shares of the company fails to implement its obligation, all the shares illegally transferred into the ownership of of such person or affiliated person with him shall be considered as non-voting and such shares shall be sold on in a forced manner.

22.5. The Commission shall determine the regulation to enforce the selling activities specified in Article 22.4 of this Law.

22.6. Information about the obligation of the person, who is obliged to purchase a controlling block of shares of the company and make offer to mandatory purchase, organization which conduct securities saving activities, within 5 days after the purchase of control package, to the Commission and is obliged to inform public through its webpage.

22.7. The Commission shall inform the public about the shares with non-voting rights through its web page within 15 days.

CHAPTER THREE

REGULATED ACTIVITIES OF THE SECURITIES MARKET

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Sub-Chapter four

General regulation Article 23. Regulated activities

23.1. The following activities shall be regarded as regulated activities of the securities market:

23.1.1. securities brokering activities;

23.1.2. securities dealer's activities;

23.1.3. securities advising activities;

23.1.4. conducting securities management;

23.1.5. underwriting activities;

23.1.6. securities ownership right registration activities;

23.1.7. securities trading clearing activities;

23.1.8. securities trading payment activities;

23.1.9. securities depository activities;

23.1.10. custodian’s activities;

23.1.11. organizing securities trading;

23.1.8. assessing the capacity to obtain loan:

23.1.9. other activities specified by legislation to be conducted with special license or defined by the Commission as regulated.

23.2. Activities specified in Article 23.1 of this Law shall be conducted by a legal entity which has been issued a special license by the Commission.

Article 24. Principles of the regulated activity

24.1. The regulated person shall adhere to the following principles in its activities:

24.1.1. to comply with legislation, regulations and rules and publicly recognized norms;

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24.1.2. to study and know the investment purpose and capacity of the customer in accordance with relevant regulation before rendering service;

24.1.3. to provide each customer with required information and advice required for making knowledgeable decision on investment;

24.1.4. to avoid creating a conflict of interest with customer, and inform the customer if a conflict of interest is created;

24.1.5. to avoid considering its own personal interest over the customers, to avoid creating a condition of conflict of interest;

24.1.6. to separate and store appropriately the assets of each customer so as to ensure the assets safety;

24.1.7. to have sufficient financial resources to conduct activities, and overcome the risks associated with such business;

24.1.8. to appropriately organize and review its internal activities;

24.1.9. to properly maintain and store record of primary records and documents;

24.1.10. to have sufficient human resources required for the work place, to have defined the duties of the employees optimally, and have supervision over its implementation of duties of the employees.

Article 25. Package of regulation of the regulated activities

25.1. Regulated activities in the securities market shall be regulated by the collection of regulation approved by the Commission.

25.2. The collection of regulated activities regulations consists of the following regulation, rules, methodology, guidance, condition, requirements and norms:

25.2.1. list of documents for applying for the special license specified in this Law;

25.2.2. condition and requirements for the legal entity to conduct regulated activity;

25.2.3. methodology and requirements for determining the solvency of the legal entity to conduct regulated activity, and control over it;

25.2.4. regulation on the raising, distributing and controlling the risk fund, reserve fund and other funds of the legal entity to conduct regulated activity;

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25.2.5. the amount of assets, of the legal entity to conduct regulated activity, in its risk and reserve funds, and condition and requirements on that for the investment;

25.2.6. maximum and minimum amount of legal entity’s service fee, to conduct regulated activity;

25.2.7. requirements for the action plan of the legal entity to conduct regulated activity;

25.2.8. regulation to deliver the information to inform the public or publish specified in this Law to the Commission,;

25.2.9. regulation on the prohibition of misleading or false advertising by regulated persons or [done] on behalf of [regulated persons];

25.2.10. regulation and guidance on providing advice to customers and documenting such advice;

25.2.11. regulation on providing information to customers about the risk associated with securities;

25.2.12. the condition and rate of fees to charge for providing information and documents to customer;

25.2.13. regulation to regulate a conflict of interest between regulated persons and customer;

25.2.14. regulation to receive and implement a customer’s orders or subscriptions;

25.2.15. regulation to determine an eligible person;

25.2.16. condition to temporarily suspend the regulated activity;

25.2.17. regulation to make offer to purchase a company;

25.2.18. requirements for the securities issuer and the regulation on the registration of securities;

25.2.19. regulation on the preparation of the activities to make a public offering of the securities and a methodology to process securities introduction;

25.2.20. regulation on the storing and transferring of non-government archive documents by the legal entity participating in securities market;

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25.2.21. guidance on preparing reports, information and application as specified in this Law;

25.2.22. the condition and requirement for a legal entity which is to open a branch or representative office, and to conduct its activities through thereof;

25.2.23. regulation on the consideration of application made during the transfer and unification of parts of its activities;

25.2.24. regulation on conducting of activities of liquidation and re-capitalization of regulated persons out of the procedures provided for in Law on Bankruptcy and the Company law;

25.2.25. payments and fees to be paid to the Commission;

25.2.26. regulation on informing about the person with a common interest;

25.2.27. others as required.

25.3. If [the Commission] deems it necessary, the Commission shall establish detailed regulations, rules and norms for each type of regulated activities, in accordance with this Law.

Sub-chapter five

Issuing of special license and right

Article 26. Making of an application requesting special license

26.1. A legal entity that requests to obtain a special license to conduct regulated activity specified in this Law shall submit an application in the prescribed form to the Commission.

26.2. When applying for the special license as specified in Article 26.1 of this Law, the following documents shall be attached as well as those documents specified in the Law on Special License of Business Activities3:

26.2.1. the type of activities to be conducted;

26.2.2. the conditions which satisfy the minimum amount of investment, assets and current asset;

26.2.3. a certified copy of the company charter;

3 Law on Special licensing of Business Activities – published at “State Information” bulletin, No.6, 2001

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26.2.4. a business plan which reflects projected profit for the first 3 years;

26.2.5. as for the securities settlement, clearing and depository organization, a detailed introduction on how to coordinate its activities with the commercial network of stock exchange, or the dealers commercial center;

26.2.6. shareholder solvency and reference letter certifying the non-existence of any debt with banking and financial organizations;

26.2.7. a risk management plan;

26.2.8. a sufficiency of professional and skilled human resource;

26.2.9. whether there is sufficient facility, technical plan/details, equipment and computer networks;

26.2.10. other information necessary for the Commission to determine whether the applicant is an eligible person to conduct such activities;

26.2.11. evidence which certifies that the person is eligible for a special license.

Article 27. Issuing of Special license

27.1. The Commission shall issue a special license in the case where the applicant meets the following conditions:

27.1.1. confirmation that the person is an eligible person for the issuance of special license and such right;

27.1.2. to have no less than three members who have been granted the right to conduct such activity by the Commission;

27.1.3. to have shareholders or own capital in an amount not less than the amount established by the Commission;

27.1.4. to have a work place, equipment, technical plan/details, and software sufficient to meet the requirements;

27.1.5. met other requirements and conditions established by the Commission.

27.2. The Commission shall have the right to amend or revoke the conditions for a special license. In this case, the special license-holder shall be informed of the conditions.

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2.3. A special license shall be issued for a period of 1 year, and if the fee of the annual regulatory service is paid before the expiry of the special license, it shall be considered that the validity of special license is extended for one year.

Article 28. Requirements to obtain Special license

27.1. It is prohibited for a person to conduct regulated activities without being granted a special license by the Commission and to mislead as if conducting such activities.

27.2. The type of activities that may be conducted by a license-holder shall be noted on the special license and only those activity shall be conducted by the special license-holder.

Article 29. Suspending of Special license

29.1. In the following cases, the Commission may suspend the special license for a period of up to 3 months, or until the prescribed requirements are satisfied:

29.1.1. on request of the license-holder;

29.1.2. violations of this Law and regulations adopted by the Commission and by the securities trade payment clearing organization;

29.1.3. violation of the conditions and requirements of a special license or right, or has became unable to meet the conditions and requirements;

29.1.4. failure to implement an order issued by the Commission;

29.1.5. failed to provide information demanded by the Commission, or provision of misleading information;

29.1.6. became ian ineligible person to conduct such activities due to the reasons specified in the law;

29.1.7. failure to pay the regulatory service fee within the prescribed period.

29.2. Legal entities whose special licenses have been suspended by the Commission may submit a request to restore its special license to the Commission after remedy of the grounds for the suspension within the specified period.

29.3. The Commission shall resolve the request mentioned in Article 29.2 within 15 business days.

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Article 30. Revocation of Special license

30.1. The Commission shall revoke the special license under the following circumstances:

30.1.1. at the request of the special license holder;

30.1.2. no request has been received by the Commission on the restoration of the special license, and the violation has not been remedied during the period of suspension of special license;

30.1.3. the Commission has considered that the legal entity is no longer capable to continue to conduct the activities under the special license in the future;

30.1.4. the regulatory service fee has not been paid within the prescribed period;

30.1.5. the legal entity went bankruptcy, or liquidated.

30.2. The Commission, when taking measures as mentioned in Article 29 and 30 of this Law, shall deliver its decision in written and it shall include The following:

31.3.1. grounds of the decision;

31.3.2. period for the decision to come into force:

31.3.3. if required, the period and the condition to suspend or revoke the special license in accordance with such decision.

Article 31. Outcomes resulting from the suspension and revocation of Special license

31.1. Suspension and revocation of the special license shall not serve as ground to terminate any valid agreements and transactions concluded by such entity, or release such legal entity from any rights, obligations and liabilities under them.

31.2. Suspension and revocation of the special license shall not serve as ground not to impose any administrative and criminal liability, or to release from any liability.

Article 32. Measures to be taken by the Commission

32.1. If the Commission has suspended, revoked or restored a special license it shall publicly announce the suspension, revocation or restoration of a special license.

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32.2. In the case the special license has been revoked or suspended, the Commission shall demand that the documents related to the customers of regulated persons and their assets shall to be sealed or documents be handed over [to the Commission], or the assets are transferred into a special account..

32.3. If the special license has been revoked or suspended, the legal entity is prohibited to conclude any agreement, negotiation or transaction other than those permitted by the Commission. Only the activities directed at protecting the customers’ interest may be permitted by the Commission.

32.4. Any agreement and negotiation concluded during the period of suspension and revocation of the special license without the permission of the Commission shall be void and such legal entity, or guilty person shall be held liable for the damage caused to others related to such void agreement.

32.5. The Commission shall obtain an explanation from regulated persons before taking measures specified in Article 30 of this Law and approve the method and the form used by regulated persons to make such an explanation .

Article 33. Right to make complaint

33.1. A regulated person who refuses to accept the refusal of the Commission to grant, suspended or revoked a special license, shall make a complaint to Supervisory Board at the Commission within 14 days from the receipt of such notice of the decision.

33.2. Making a complaint in accordance with Article 33.1 of this Law shall not serve as ground to suspend the implementation of the decision of the Commission; however, the Supervisory Board may temporarily suspend a decision of the Commission.

33.3. Upon the review by the Supervisory Board of the complaint specified in Article 33, the Supervisor Board shall issue any one of the following decisions:

33.3.1. to revoke the decision of the Commission;

33.3.2. to uphold the decision of the Commission and dismiss the complaint;

33.3.3. to make the required amendments to the decision of the Commission.

33.4. The Commission is obliged to accept and implement the decision of the Supervisory Board. If a person does not agree with the decision of the Supervisory Board, the person may file a claim with the court. .

Article 34. Granting of a right to professional

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34.1. A professional that works for a legal entity that conducts regulated activities shall be granted the right [to conduct the regulated activities] from the Commission as specified in this Article.

34.2. The Head of the Commission shall grant to a citizen who has passed the Specialization Commission’s professional examination the right to work for a legal entity that conducts regulated activities for a period of 3 years.

34.3. The professional examination shall be organized by a specialization commission (“Specialization Commission”) at the Commission. The Specialization Commission shall have 9 members.

34.4. The composition of the Specialization Commission shall be approved by an order of the Commission, on the basis of a proposal made by a relevant organization: one member will be from the State central authority in charge of financial matters, three members from self-regulatory organization4 and 5 members appointed by the Commission. Members of the Specialization Commission shall have a background in economy, finance, investment and law.

34.5 The head of the Specialization Commission shall be selected by a majority vote of the members.

34.6. The Commission shall regulate the Specialized Commission that administers the professional examination that grants of right to professionals, suspending, or revoking of such rights.

34.7. A citizen who takes the professional examination, shall have participated in training organized by the Commission or a self-regulatory organization.

Sub-chapter six

Types of Regulated activities

Article 35. Broker’s activity

35.1. Brokerage includes the execution of brokerage activities on the basis of the agreement concluded with the customer related to the purchase, sell (includes selling of securities, or purchasing of securities from the primary market by through assignment by the securities issuer), and trade of securities on behalf of the customer using the customers own asset.

35.2. Unless otherwise provided in the legislation and specifically provided for in the agreement, the broker may purchase, under the broker’s name, the unsold

4 See Article 72

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remaining securities of his customer or the securities issuer, which was offered on the primary market.

35.3. The broker is obliged to comply with the legislation, regulations and rules approved by the Commission, self-regulatory organization with membership, the stock exchange, and securities trade payment clearing organization in its activities.

35.4. The relations between the broker and the broker’s customer shall be based on an agreement. The standard conditions of the brokerage agreement and procedures to conclude a brokerage agreement shall be determined by the Commission.

35.5. A sample of a brokerage agreement, formalization and procedures to conclude a brokerage agreement shall be regulated by a regulation approved by the Commission and the rules of the broker.

35.6. The broker is obliged to implement the assignment as issued by the broker’s customer fairly in accordance with the conditions and requirements of the brokerage agreement, and if the conditions of the brokerage agreement are changed to inform the customer and renew the assignment.

35.7. Despite the fact that the broker conducts dealer’s activities at the same time, the broker is obliged to implement the customer’s assignment on a priority basis.

35.8. A broker is obliged to inform the customer of a conflict of interest before concluding a brokerage agreement, or immediately inform the customer of a conflict of interest which is created after concluding a brokerage agreement.

35.9. Any material damage to the customer due to the failure of the broker to inform the customer of conflict of interest before concluding a brokerage agreement or immediately inform the customer of a conflict of interest created after concluding a brokerage agreement shall be borne by the broker’s asset in accordance with the prescribed procedure.

35.10. The broker is obliged to open an account with an authorized and independent financial organization which conducts monetary saving activities for each of its customer, store the monetary assets of the broker’s customers in the account, and protect it reliably, and it is prohibited to dispose such asset without the permission of the customer.

35.11. Unless otherwise provided in the law and in the brokerage agreement, the broker is obliged to credit the monetary asset received [by it] from its customer as defined in an executed brokerage agreement, and/or the money received from other persons in the name of the customer in accordance with the brokerage agreement concluded by a power of attorney granted by [the broker’s] customer in the account of such customer.

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35.12. It is prohibited for the broker to satisfy the broker’s obligation to others from the asset of a customer that are in the possession of the broker.

35.13. The broker shall not mix or combine its own asset with the asset of other customer except in case where the executed brokerage agreement is for the purchase of securities from a loan made to the broker’s customer or other payment obligation on behalf of its customer.

35.14. A customer may give the broker to the right to dispose of the customer’s asset as defined in an agreement; the agreement must include conditions regarding the pledge or guarantee used to satisfy the obligation to repay the asset.

35.15. The asset specified in Article 35.14 of this Law shall be taken and deposited in a separate account from the other assets to which no permission was given by the customer.

35.16. The standard conditions of the margin agreement and detailed regulation related to the concluding of an agreement shall be determined by the Commission.

Article 36. Dealer’s activities.

36.1. The dealer’s activities includes the offering to the public the purchase or sell of certain securities at a certain price on behalf of and in the customer’s name, and upon an order to purchase or sell securities is received the dealer is obliged to implement such order..

36.2. Except for the price of securities specified in Article 36.1 of this Law, the dealer may offer under the following conditions:

36.2.1. the maximum and minimum amount of securities to be purchased or sold;

36.2.2. the validity period of price offered to the public;

36.2.3. other offers not prohibited by law.

36.3. A dealer may change or revoke the offer it makes to the public in the same manner it was first offered.

36.4. A dealer is obliged on an undisputed basis to accept an offer to purchase or sell securities received as a response the dealer’s valid offer made to public.

36.5. For the purpose of satisfying the obligations specified in Article 36.4 of this Law, the stock exchange may demand a certain amount of pledged asset to be deposited in a special account from the dealer.

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36.6. Loss caused by the dealer’s refusal from implementing the dealer’s offer made to public shall be solved through court procedure.

Article 37. Securities advisor’s activities

37.1. A securities advisor’s activities include research and analysis required for determining the securities to be offered on the primary market on the basis of an agreement, and providing independent professional advice for a fee on the price, conditions and terms of the purchase or sale of the securities.

37.2. Research or analyses conducted by a legal entity with a right to conduct regulated activity, or any one investor, for the purpose of its own activities and investment decision, or conducting research for public purpose and publicizing the result shall not be considered as a securities advisor’s activities.

Article 38. Securities management activities

38.1. Securities management activities means activities to manage securities and assets related to securities which are under ownership of the customer/trustee as the owner on the basis of an asset management agreement.

38.2. The losses incurred by a customer due to a conflict of interest unknown in advance between the securities manager and its trustee-customer, or between several trustee-customers of such securities manager shall be borne by the securities manager.

38.3. In the event the customer is a professional investor, the securities manager execute an agreement related to derivative securities.

38.4. Detailed regulation to conduct securities management activities shall be approved by the Commission.

38.5. The management of investment fund or pension fund shall be regulated by a special law adopted in conformity with this Law.

Article 39. Underwriter’s activities

39.1. Underwriter’s activities conducted by a legal entity which has been granted a special license include professional underwriter’s activities related to the public offer of a legal entity’s issued securities or arranging such securities on the primary market on the basis of the executed agreement.

39.2. A special license to conduct underwriter’s activities shall be issued by the Commission to legal entity which has a valid special license to conduct either broker’s activity or dealer’s activity, and who meets the relevant requirements.

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39.3. The revocation of either a broker’s or a dealer’s if both activities are licensed, then both special licenses) (special licenses of a legal entity with a special license to conduct underwriter’s activity shall serve as ground to revoke the special license of such legal entity to conduct underwriter’s activities.

39.4. Underwriting service shall be rendered under any one of the following condition:

39.4.1. firm means the underwriter buys all the securities of the securities issuer offering to public;

39.4.2. undertake using best efforts the underwriter does all the best effort required to sell the securities by introducing the securities to its own investors;

39.4.3. underwriter buys remaining unsold securities after offering to the public;

39.4.4. other conditions specified in the underwriting agreement.

39.5. Underwriting services may be rendered by a single legal entity or jointly with other authorized legal entities. In this case, the parties shall conclude a cooperation agreement and the agreement shall mandatorily include the following conditions:

39.5.1. the responsibilities of each parties that render the underwriter’s service in cooperation;

39.5.2. the allocation of the rights, obligations and liabilities of the parties to render underwriter’s service in cooperation;

39.5.3. the validity period of the agreement.

39.6. The regulation for conducting underwriting activities and the standard condition of the underwriting agreement shall be determined by the Commission.

Article 40. Securities ownership right registration activities

40.1. The securities registrar activities include activities to collect, register, store and publicly provide information related to certain securities, the securities issuer or owner, and actions and process related to securities ownership right by the securities owner (including the certified owner /trustee/).

40.2. The securities ownership database for the securities ownership rights registration shall be understood as a unified registration database containing information about the ownership of securities, the securities, the owners, and the owner’s rights and obligations.

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40.3. A person who is conducting the securities ownership registration is obliged to store for a specified period, maintain the safety and provide others in accordance with relevant procedures without any interference with the securities ownership registration information and documents.

40.4. Securities ownership registration shall be conducted by a legal entity.

40.5. The regulation to conduct securities ownership registration shall be established by the Commission.

40.6. A legal entity conducting securities ownership registration is prohibited from disposing of securities under a person’s ownership which is under securities registration on its own initiative without the permission of the securities owner.

40.7. A securities issuer may obtain a copy of the registration of securities owners for securities issued by the securities issuer, once a year free of charge and in other cases the fee shall be determined by an agreement concluded between the parties.

40.8. A person conducting securities ownership registration who is found guilty shall be held liable for the loss caused due to rendering of false, incorrect and incomplete information to another person.

40.9. If there are grounds, the person who is conducting securities ownership registration is entitled to refuse to make certain registration, to examine certain information suspending the securities registration activities or have the information inspected by the authorized [Government] authorities.

40.10. The beneficial securities owner or the legal securities owner are both obliged to submit the information required for securities registration correctly and in a timely manner.

40.11. The registration of securities ownership shall be conducted through an executed agreement with only one legal entity conducting registration activities and it is prohibited to be registered twice.

40.12. Securities registration under the name of a legal securities owner shall not restrict the ownership rights of the beneficial securities owner who is the securities settlor and such securities shall not be used to satisfy the obligations of the legal securities owner.

40.13. The maximum fee for rendering securities ownership r registration service shall be determined by the Commission.

Article 41. Securities trading clearing activities

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41.1. Securities trade clearing activities are activities to determine the payment rights and obligations of the parties under an executed agreement or transaction concluded between the participants related to securities trading at the conclusion of such a trade and within the specified period of each agreement or in a integrated manner, to make relevant financial registration and clearing, to ensure the preparation of the relevant payment, to submit the invoice of the securities trading to the relevant organization, to make the relevant financial transaction in accordance with the payment report and endorse, and deliver the relevant information to securities depository and registration organization.

41.2. A Legal entity that is conducting securities trade clearing activities shall establish a special fund for the purpose of decreasing the risk of revocation of transactions made during the securities trading process.

41.3. The regulation of securities trade clearing activities shall be determined by the Commission.

Article 42. Securities trading payment activities

42.1.Securities trade payment clearing are such activities to transfer the securities purchaser’s purchase payment into the securities seller’s account in accordance with the invoice received from the organization that conducted the securities trade clearing activities at the conclusion of the securities trading and to transfer a defined number of securities from the securities trader’s account into the purchaser’s account using specialized equipment for the delivery of the invoice between the securities depository and monetary depository organizations making the payment at once within prescribed period.

42.2. The securities trade payment transaction shall be done only once and it shall not be refunded.

42.3. If it is impossible to make the relevant payment transaction or the relevant cash or securities were not deposited in the relevant account, when settling the invoice received from the securities trade clearing organization in accordance with the relevant procedures and within the specified period, such payment transaction shall not be made.

42.4. In the event the circumstance specified in Article 42.3 of this Law have arisen, the securities trade payment organization shall immediately inform the securities trade clearing organization, and the securities trade clearing organization shall work with the securities trade organization on this issue to either make a decision to correct the faulty invoice or revoke the trading agreement, and inform the securities trade clearing organization.

42.5. The issue whether to conclude the invoice of the payment transaction specified in Articles 42.3 and 42.4 of this Law shall be decided within 1 business day,

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and if a fault is not corrected within this period, such trading agreement or related invoice of the payment transaction shall be considered as void.

Article 43. Securities depository activities

43.1. Securities depository is the activities to deposit securities and conduct the registration of the securities ownership under deposit.

43.2. Regulation of the securities depository activities, management, organization and structure of the legal entity conducting such activities, and the condition and requirements of the activities shall be determined by the Commission.

43.3. The securities depository activities shall be conducted by a legal entity and the securities shall be deposited on the basis of a written and executed securities depository agreement between the owner.

43.4. Unless otherwise set forth in the securities depository agreement, the securities depository agreement shall not provide a person depositing securities with a right to dispose of the securities.

43.5. It is mandatory that the securities depository agreement include the following:

43.5.1. the subject matter being deposited as defined in the agreement;

43.5.2. the rights and obligations of the person depositing the securities on the securities being deposited, and procedures related to any transaction and provide permission of the securities owner to make such transaction

43.5.3. the validity period of the agreement;

43.5.4. the service fee under the agreement, and procedures to make such a payment;

43.5.5. the procedures to report the securities owner of the securities being deposited;

43.5.6. others.

43.6. A legal entity conducting securities depository activities is obliged to inform the securities owner of information received from the securities issuer relating to securities under deposited and the person who is conducting the securities registration activities of changes in the securities ownership to be included in relevant registration and to register the change in the securities ownership.

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43.7. If an authorized legal entity which conducts securities depository activities mutually agrees under an executed agreement with a customer, it may own certain securities as a legal owner.

43.8. Legal entity which conducts securities depository activities does not have a right to deposit monetary asset and it shall specifically deposit securities dividend and shares and securities sell payment in the account opened in the name of the customer with authorized financial organization which conduct monetary depository activities.

43.9. It is prohibited for a legal entity conducting securities depository activities to satisfy its obligations from the securities under deposit with the securities depository organization in a customer’s account n or monetary asset related to such securities.

Article 44. Custodian’s activities

44.1. The custodian’s activities are activities such as to deposit and ensure the completeness of the securities in the ownership of the securities owner, and to render services to the securities owner in relation to the exercise of other rights of the securities owner.

44.2. The custodian’s activities may be conducted only by a controlled or subsidiary company of the parent company which has a right to conduct banking activities.

44.3. A person who is conducting custodian’s activities is prohibited from concluding any agreement or transaction with any other person other than the owner of the securities being deposited or to dispose of the securities.

44.4. The regulation to conduct custodian’s activities shall be established by the Commission.

Article 45. Securities trade organizing activities

45.1. Securities trade organizing activities means activities to render services to create a condition to conclude agreement related to the purchasing and selling of securities at securities primary and secondary market.

45.2. The securities trade organization shall be a stock exchange.

45.3. The securities trade organization is obliged to provide free of change to the public the following information:

45.3.1. procedures to participate in securities trading;

45.3.2. procedures to enter securities into the securities trading;

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45.3.3. procedures to conclude securities a trading agreement;

45.3.4. procedures to register a securities trading agreement;

45.3.5. procedures to implement the securities trading agreement;

45.3.6. rules on the prohibition of inflating securities price;

45.3.7. schedule to render services to organize securities trading;

45.3.8. other information specifically provided to the public according to the legislation and internal code.

45.4. The securities trade organization shall provide public information each purchase and sell agreements of securities concluded during the process of securities trading as follows:

45.4.1. the date, validity period and registration number of the agreement;

45.4.2. the registration number and distinguishing mark of the securities as it is the subject matter of such agreement;

45.4.3. unit price of the traded securities;

45.4.4. number of total traded securities;

45.4.5. other information prescribed to be provide to the public under legislation and international code.

Article 46. Stock exchange

46.1. The stock exchange may organizing securities trading and do the following:

46.1.1. currency exchange;

46.1.2. commodity exchange (trading of financial instrument related to the transaction of commodities);

46.1.3. securities trading clearing;

46.1.4. press and publishing on securities;

46.1.5. leasing of certain properties for charge for the purpose of organizing securities trading in accordance with established regulations.

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46.2. The stock exchange is prohibited from conducting other activities other than set forth in Article 46.1 of this Law.

46.3. The stock exchange that conducts securities trade clearing shall have a special unit to conduct.

46.4. The managing, executive or supervising official of the stock exchange is prohibited from holding any position in regulated legal entity which participates in securities trading.

46.5. It is prohibited for a single person or several persons with common interest to hold more than 20 percent of the total securities issued by the stock exchange.

46.6. The representatives of the Commission with voting right shall on the Board of Directors of the stock exchange.

46.7. The stock exchange shall keep records of securities to be traded on the stock exchange. Activities related to securities registration or de-registration, or changes in such registration shall be conducted by a professional registration council.

46.8. The members of the registration council of the stock exchange shall not have voting rights on the following issues:

46.8.1. on the issues related to the securities issued by a securities issuer;

46.8.2. a person related to securities issuer, or its controlled, subsidiary or twin5 company;

46.8.3. if employed by the tlegal entity of the securities issuer, or employed in its controlled, subsidiary or twin company;

46.8.4. if there is other condition with a conflict of interest.

Article 47. Participating in the trading of stock exchange

47.1. In the trading of the stock exchange, only authorized brokers and dealers with membership in such stock exchange shall participate.

47.2. In the event the securities clearing activities is conducted by special authorized organization, it shall not be considered that such organization has participated in the trading of the stock exchange.

47.3. Other person unless specified in Article 47.1 of this Law shall participate in the trading of the stock exchange through authorized broker and dealer.

5 Undefined in the Company Law and this Law.

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Article 48. Conditions and requirements for the activities of the stock exchange

48.1. The stock exchange is obliged to operate a meeting according to the following conditions and requirements:

48.1.1. to approve the regulation on the trading and participation in the trading of the stock exchange;

48.1.2. to provide relevant service when trading securities issued on the basis of the transaction of derivative securities or commodities traded on the stock exchange;

48.1.3. to approve regulation on the registration or de-registration of securities at the securities registration or entering of such trading at the stock exchange;

48.1.4. to approve regulation on the registration or de-registration or trading of securities;

48.1.5. to have the rules and regulations, and their changes or amendments prescribed to be approved by the stock exchange as specified in this Law, endorsed by the Commission in accordance with relevant procedure;

48.1.6. to inspect each agreement concluded during the trading of the stock exchange, and control the conduct of illegal activity;

48.1.7. to organize the trading of the stock exchange within prescribed period on a fair basis without any shortcomings.

48.2. The stock exchange, for the purpose of implementing its obligation specified in Article 48.1.6 of this Law, is entitled to demand necessary information from participants in the trading, securities owners, and securities issuers.

48.3. The stock exchange is entitled to establish the amount of service fees and discounts for its service.

Article 49. Activities assessing the capacity to obtain a loan

49.1. Activities to assessing the capacity of a securities issuer to obtain a means third party independent activities to determine the capacity of a securities issuer to obtain a loan on the basis of specially prepared methods and methodologies.

49.2. If the authorized person who conducts activities to assess the capacity to obtain a loan met the relevant condition and requirements, rating can be established by

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their quality, risk and benefit through making analyses on certain types of financial instrument traded on the primary market.

49.3. The authorized legal person who conducts activities to assess the capacity to obtain a loan is prohibited from rendering service to customers with a conflict of interest, determine false rating, or determine rating on the basis of incomplete information or analyses.

49.4. The regulation on the activities to assess the capacity to obtain a loan shall be established by the Commission.

Article 50. Other regulated activities

50.1. Other activities specified in law and determined by the Commission as regulated activities shall apply to regulated activities.

Article 51. Combining several regulated activities

51.1.The following persons may combine The following activities respectively:

51.1. Authorized person, who conducts broker’s activity, dealer’s and underwriter’s activity;

51.2. Authorized person, who conducts securities depository activities, securities trading clearing or payment activities;

51.3. Authorized person, who conducts securities trading organization activities, securities clearing activities;

51.4. activities permitted by the Commission from time to time.

51.2. In the event, single legal entity conducts several of activities specified in this Law, requirements for each activities shall be the combination of all the requirements for each activities.

Sub-chapter seven

Accounting and auditing

Article 52. Bookkeeping of accounting

52.1. The Regulated person is obliged to keep record of basic accounting which fully reflects the transactions concluded in relation to the activities with special license, and movement and change of its own and customer’s asset, and to prepare correct balance sheet, and cash flow statement in its time.

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52.2. The documents and records specified in this Article shall be kept with the organization for not less than 5 years and after transferred to archive. The Commission and person appointed by it have a right to examine those documents and records and obtain the copy of thereof.

Article 53. Auditor

53.1. The Regulated person shall select the auditor who have been issued a right from the Commission, and conclude agreement within one month after obtaining issued of the special license, and inform the Commission.

53.2. It is prohibited to appoint the following person as auditor specified in Article 53.1 of this Law:

53.2.1. director, expert, employee, shareholder and customer, who were being employed or currently being employed by regulated persons;

53.2.2. related person with the person specified in Article 53.2.1 of this Law;

53.2.3. auditor who have not gotten a right from the Commission.

53.3. Regulated person shall inform the Commission in written of the full name, address, and location of the auditor within 7 days after the concluding of an agreement with him.

53.4. Regulated person shall inform the Commission of dismissal of its auditor, or termination of its agreement with the auditor in written after 7 days thereof.

Article 54. Audit inspection

54.1. Regulated person shall have auditing inspection conducted on its accounting and other registration after the end of financial year, and submit the copy of its balance sheet with the audit opinion to the Commission within 25 th of February of the following year.

54.2. Auditor shall immedietly inform the Commission and regulated person in written within 5 business days in the event circumstances which might seriously affect the financial condition of regulated persons, or which violates the other financial regulation during the process of audit inspection.

54.3. If deems necessary, the Commission may demand to have audit inspection conducted on quarterly balance sheet.

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CHAPTER FOUR

Securities market information

Sub-chapter eight

Securities market information

Article 55. Securities primary market information

55.1. The securities issuer of the primary market is obliged to provide free of charge to an interested persons with the following information:

55.1.1. information reflected in the securities prospectus;

55.1.2. regulation on the issuance and selling of securities, reflected in the regulation and rules of the securities issuer company;

55.1.3. financial balance sheet;

55.1.4. information defined by the Commission, stock exchange and other competent authorities and those specified in the regulation and rules of the securities issuer to be disclosed for public.

Article 56. Securities secondary market information

56.1. During the period when securities of a securities issuer are traded on the securities secondary market the above noted securities issuer shall inform the Commission, the stock exchange and the public about the changes which may affect the shareholders interest.

56.2. The Information [about the changes] specified in Article 56.1 of this Law shall include the following information:

56.2.1. changes made in the structure of the management [management of company includes shareholder meeting, board of directors and executive director6] of a securities issuer;

56.2.2. changes in the structure of the shareholders who holds 10 percent or more of the voting shares;

56.2.3. re-organization7 of a securities issuer, changes in its controlled, subsidiary8 and twin9 company; 6 see the Company Law, Article 60 - 807 see the Company Law, Article 188 see the Company Law, Article 69 Not defined term in the Company Law

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56.2.4. information regarding the sealing and confiscation of assets of a securities issuer ;

56.2.5. information regarding a securities issuer’s acquisition of any newly issued license/special permission and suspension and termination of a license of a securities issuer;

56.2.6. decision of the securities issuer’s shareholders meeting;

56.2.7. changes in the investments in other legal entity which holds 10 percent or more of a securities issuer;

56.2.8. other information that might affect the share price.

56.3. A securities issuer shall inform the Commission, stock exchange and the public through means of a press and media about the information specified in Article 56.2 of this Law within 10 days from the occurrence of such events.

Article 57. Regulated persons information

57.1. A legal entity with a special license to conduct regulated activity is obliged to inform the relevant person with the following information:

57.1.1. to provide information that affects a customer’s interest for the foregoing customer in accordance with the agreement concluded with a customer;

57.1.2. to disclose an information, which is in its possession, about securities and securities issuer other than information those are confidential information during the process of receiving securities subscription;

57.1.3. to provide information regarding restrictions on issued securities and a securities issuer and special condition of such securities for the customer;

57.1.4. to explain the grounds for the failure or refusal to implement a customer’s subscription by regulated persons;

57.1.5. about securities transactions which shall be informed to the Commission under legislation, or about the customer who has concluded the foregoing transaction or a decision to settle the foregoing transaction;

57.1.6. to deliver information which is received by regulated persons in order to deliver such information the customer;

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57.1.7. to provide information about regulated persons organization to a customer in accordance with the procedures adopted by the Commission;

57.1.8. to inform the Commission about amendments made in the rules and regulations of its organization in accordance with the proscribed procedures.

Article 58. Information of the securities trading organization

58.1. The stock exchange is obliged to provide all the information about the securities which the stock exchange has registered and an issuer of such securities except for confidential information for any party which is interested to see that information.

58.2. The stock exchange shall inform the public about information specified in Article 58.1 of this Law through its own public media or other available press and media which satisfies the requirements determined by the Commission.

58.3. The stock exchange shall establish detailed procedures to deliver the information specified in Article 58.1 of this Law to the public or its own members by the stock exchange’s internal regulation.

Article 59. Investor’s information

59.1. The investor is obliged to inform the securities registrar or the trustee [securities certified manager] about changes related to securities under its/his/her ownership in accordance with the established procedures.

59.2. The securities certified manager [trustee] shall not be liable for any loss/damage to the trustee or any other person which arose from the failure to deliver information in accordance with the relevant procedures by the investor who have concluded the trust agreement [certified management agreement].

59.3. If the Commission deems it necessary, the Commission is entitled to demand information about securities which is in the ownership of the investor or about the relevant person10 of the investor during an inspection.

Article 60. the Commission’s information

60.1. The Commission shall publicize the following information within its rights and obligations:

60.1.1. about the securities prospectus11;

10 see Article 4.1.34 of this Law11 see Article 9 of this Law

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60.1.2. explanations, reports and conclusions submitted from a securities issuer to the Commission;

60.1.3. about the decision to issue, suspend or revoke a special license or right and the grounds to issue the foregoing decision;

60.1.4. annual activity report of the Commission.

60.2. Relations concerning the delivery of information to a foreign regulatory organization or international organization by the Commission shall be in accordance with Article 9 of this Law.

Article 61. Receiving information from others by the Commission

61.1. In order to promptly and immediately implement the functions of the Commission, the Commission is entitled to demand information which is deemed necessary information from citizens and legal entity.

61.2. The information specified in Article 61.1 of this Law shall be recognized as confidential information and the Commission shall use the foregoing information only for its official use and shall not disclose the foregoing information to others without the permission from the owner of confidential information.

CHAPTER FIVE

SECURITIES MARKET REGULATION

Sub-chapter nine

The State Regulation in the Securities Market

Article 62. The state central administrative organization in charge of matters related to securities market

62.1. The state central administrative organization in charge of matters related to securities market shall exercise the following rights and obligations on securities activities:

62.1.1. to prepare proposals on the improvement of securities legislation;

62.1.2. to determine the state policy on securities market in coordination with integrated financial and economic policy and to provide recommendation about such policy to the Government;

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62.1.3. to cooperate with the Commission and to support the activities of the Commission;

62.1.4. to issue Government bonds and to establish the standard price of the Government bond on the securities market;

62.1.5. to issue guarantees for the bonds issued by the Government and the Governors of aimag and capital city;

62.1.6. other functions specified in legislation.

Article 63. Organization that implements the state regulation in the securities market

63.1. The Commission shall exercise the power of oversight and regulate the securities market.

63.2. Any securities participant12 shall implement the decision approved by the Commission in order to implement legislation.

63.3. The status of the Commission shall be regulated by the Law on Status of the Commission and this Law.

Article 64. Purpose of the State regulation

6.1. The regulation in the securities market as implemented by the State within the scope of this Law shall have the following purposes:

64.1.1. to promote and support fair, efficient, competitive, transparent and well-ordered conditions in the securities sector;

64.1.2. to improve the citizens education on the securities market, and promote activities directed for this purpose;

64.1.3. to protect the rights and legitimate interests of the investors at appropriate level in accordance with general principle that the investor is responsible for his/her/its own investment decision;

64.1.4. to take measures to reduce crimes and violations in the securities market;

64.1.5. to mitigate the system risk of the securities market.

Article 65. Powers of the Commission

12 see, Article 4.1.10 of this Law

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65.1. The Commission shall have the following powers:

65.1.1. to take necessary measures to ensure the implementation of this Law and other legislation approved in conformity of this Law and to approve regulations, rules and norms that are necessary for implementation of the state regulation of the securities market;

65.1.2. to determine the State’s priority direction which shall be used for the development of the securities market and to take measures to establish fair, efficient, competitive, transparent and well-ordered conditions in the securities market;

65.1.3. to determine conditions and requirements for the applicants for special license/permission and to approve detailed regulation regarding issuance, suspension and revocation of special license/permission;

65.1.4. to define the criteria for regulated persons, to approve regulation and rules which shall be applicable for regulated persons and to approve methodology to calculate the satisfaction of criteria on regulated persons;

65.1.5. to approve the conditions and requirements for an agreement which related to securities and which concluded between regulated persons and an customer and to enact the regulation for assessment and reporting of performance of obligation under the foregoing agreement;

65.1.6. to regulate, overview and inspect activities of regulated persons, to take measures to remove any violation, to give the task and to impose the responsibility to regulated persons;

65.1.7. to determine whether governing persons of regulated persons is an eligible person, to give permission to work as a governing person and to take measures to discharge a person who is not an eligible person from a position as a governing person of regulated persons;

65.1.8. to register securities of a domestic and foreign legal entity for public offering and trading in the territory of Mongolia, to give permission to start the public offering or to start trading in the securities primary and secondary market, to suspend and cease trading activity of certain securities and to remove the registration of securities;

65.1.9.to determine conditions and requirements for a securities issuer and to enact the regulation regarding activities specified in Article 65.1.8 of this Law;

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65.1.10. to register securities which are to be traded in the territory of Mongolia and regulated persons which would undertake activities in the securities market;

65.1.11. to choose and approve the means of press and media for published and to determine conditions and requirements for the activities of the press and media organization that have chosen and approved;

65.1.12. to enact the rules and regulations which shall be applicable for activities of the self-regulatory organization13, the securities trade organization, the securities trade clearing organization14, the securities trade payment clearing organization15 and the securities depository organization16, and to enact the regulation regarding reporting from the foregoing organizations to the Commission and the public;

65.1.13. to regulate activities of cooperate investment;

65.1.14. to issue permission to auditing, assessment and legal companies which will provide services in the securities market;

65.1.15. to regulate activities with respect to making a proposal to voluntarily and mandatory purchase all shares of company;

65.1.16. to protect the rights and legitimate interests of a customer at appropriate level in accordance with general principle that a customer is responsible for his/her/its own investment decision;

65.1.17. to improve public education and information regarding the risk, benefit and responsibilities of the securities investment and the securities market;

65.1.18. to take measures directed at suppressing the illegal, unethical and inequitable activities of the securities market;

65.1.19. if the Commission deems it necessary, to make a claim on behalf of a securities holder with or without a power of attorney for the legal interest of a securities holder and participate in a court hearing;

65.1.20. to cooperate with authorized regulatory organization of foreign countries and international organizations, and to provide mutual assistance which is beneficial to each party;

65.1.21. other functions determined by a law

13 see Article 72 of this Law14 see Article 4.1.19 of this Law15 see Article 4.1.20 of this Law16 see Article 4.1.21 of this Law

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Article 66. Cooperating and providing mutual assistance with securities regulatory organization of foreign country and international organization

66.1. The Commission may conclude the memorandum or the agreement with securities regulatory organization of foreign country or international organization in order to provide mutual assistance for certain inspection and monitoring, to provide necessary information and to implement functions of the Commission.

66.2. The Commission shall refuse to provide assistance if the assistance requested from a securities regulatory organization of foreign country or international organization would be possible to contradict with and harm common interest of Mongolia.

66.3.In case of providing assistance to a securities regulatory organization of foreign country and international organization, the Commission shall take into account of matters that whether assistance requesting party would pay the relevant expenses or not, and whether the same regulatory organization of foreign country and international organization have authority to provide assistance within its power in case request on similar matter would made from Mongolian side and the grounds specified in Article 9.2 of this Law.

66.4. In case of submitting request to provide assistance to the Commission, a securities regulatory organization of foreign country and international organization shall refer the purpose of request, purpose of use of information and confidentiality.

66.5. The information provided by the Commission shall be used only for the purpose referred in the request from a securities regulatory organization of foreign country and international organization and it is prohibited to disclose, share, use and transfer the information without consent of the Commission.

Article 67. Issuing of recommendation

67.1. If the Commission deems necessary, the Commission is entitled to issue recommendation for the regulated persons, self-regulatory organization and public on the following matters:

67.1.1.on matters related to protection, warning and alert of a investor’s interest;

67.1.2. on matters related to increase of efficiency of the state regulation in the securities market;

67.1.3. on matters related to implementation of securities legislation;

67.1.4. on matters which deemed necessary by the Commission

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67.2. The Commission shall deliver its recommendation to the relevant person in written form and if necessary, the Commission shall publicize its recommendation through other means of public media.

Article 68. Providing of an assignment

68.1. The Commission is entitled to provide assignment to a self regulatory organization, regulated persons, and Securities Issuer in the following circumstances:

68.1.1. there is necessity to protect the legal interest of a customer, investor and shareholder;

68.1.2. it has been determined that the governing person of securities issuer, regulated persons and self-regulatory organization would not meet requirements of an eligible person or there is necessity to discharge such governing person from its/his/her position because of the failure to meet requirement for eligible person;

68.1.3. necessity to correct or remedy the violation that regulated persons breached or was breaching this Law or and legislative acts adopted in conformity of this Law by the Commission, or provided false or misleading information to the Commission;

68.1.4. other circumstances deemed necessary.

68.2. The assignment of the Commission may contain the following one or several prohibition or demand and regulated persons shall mandatory duty to implement the assignment:

68.2.1. to cease activities which breaches a laws of Mongolia and to remedy the consequences of breach of a law;

68.2.2. to prohibit from concluding of certain transactions;

68.2.3. to prohibit from conducting certain activities;

68.2.4. to prohibit from conducting some activities in a certain way;

68.2.5. to prohibit the disposal of certain asset existing in Mongolia or in foreign country, to demand not to use such asset for use other than permitted;

68.2.6. to demand to deposit certain amount of asset in the territory of Mongolia for the purpose of satisfying the obligation implementation arisen due to the regulated activities;

68.2.7. to conduct other actions deemed necessary.

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68.3. An assignment specified in Article 68.1 of this Law shall be valid within the period specified by the Commission.

68.4. A legal entity and professional that have received the assignment from the Commission must implement the assignment within determined period and report the implementation of an assignment in accordance with the prescribed procedure.

Article 69. Registration of regulated person

69.1. The Commission shall keep registration of regulated persons.

69.2. The detailed regulation regarding registration of regulated persons shall be enacted by the Commission and the registration of regulated persons shall include detailed information of regulated persons and changes made in the foregoing information.

69.3. The registration of regulated persons shall be open to public.

Article 70. Determining of eligible person

70.1. The Commission shall determine a eligible person on the basis of the following conditions and conditions set by the prescribed regulation:

70.1.1. financial condition and solvency;

70.1.2. capacity to perform the Regulated Activities in professional and just manner;

70.1.3. in case of an individual, whether profession, experience, responsibility, latest job position and financial condition is suitable for the position in which the foregoing individual is candidate or not;

70.2. In case of determining an eligible person, the Commission shall take account information submitted from a person who is interested to position in which he/she/it is candidate/applicant and the following information:

70.2.1. information about employee and relevant person of the company and any person those are conducts Regulated Activities on behalf of regulated persons;

70.2.2. if regulated persons is a member of the union of legal entity, information about all legal persons involved in the foregoing union and influential shareholders and governing person of those;

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70.2.3. whether regulated persons has adopted its own internal regulations and rules for its activities or not and whether regulated persons established efficient internal supervisory and risk management structure or not;

70.2.4. information about current and further business.

70.3. If regulated persons is a member of the union of legal entity, the Commission is entitled to demand any required information from other members of the foregoing union.

Article 71. Legal guarantee of activities of the Commission, its members and employees

71.1. The Commission, Head of the Commission, its inspectors and employees shall not be held liable by their personal assets except for they caused loss by their deliberate action when exercising or implementing their functions, powers and obligations specified in this Law.

71.2. The inspector of the Commission shall have the power of state inspector.

71.3. The Law on State Inspection shall apply to activities of the inspector of the Commission.

Sub-chapter ten

Non-governmental and professional regulation in the securities market

Article 72. Self-regulatory organization

72.1. Non-governmental organization registered with the Commission shall exercise the power of the self-regulatory organization in the securities market of Mongolia.

72.2. self-regulatory organization specified in Article 72.1 of this Law shall be a non-governmental and professional organization which has membership which composed of regulated legal entities and professional those have a right to undertake professional activity in the securities market. A main purpose of a self-regulatory organization is to protect interest of its members, to determine the common procedures of the professional activities, to improve a capacity of its members, to develop the securities market and to maintain the stability of securities market.

72.3. The power of self-regulatory organization shall commence upon its registration with the Commission.

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72.4. The self-regulatory organization may have its branches in aimags and capital city of Mongolia.

72.5. A legal entity or professional those have special license to conduct Regulated Activities at the securities market must be a member of any one of the self-regulatory organizations those registered with the Commission.

Article 73. Powers of the self-regulatory organization

73.1. The self-regulatory organization shall exercise the following rights and obligations:

73.1.1. to make proposal to the state organizations on the improvement of the securities market legislations and to provide comments on the draft legislations, rules and regulations drafted by the state organizations;

73.1.2. to settle disputes that have arisen between members of a self-regulatory organization or dispute between member and its customer through non-court procedure;

73.1.3. to organize training and re-training among members of the self-regulatory organization;

73.1.4. to develop the ethical norms, the instructions, guidance and recommendations for the professionals and to ensure implementation of those norms, instructions, guidance and recommendations after getting them approved by the Commission;

73.1.5. to conduct research in the activities of regulated persons and to rate member organizations of a self-regulatory organizations and publicize the result of research;

73.1.6. to examine activities of a member organizations a self-regulatory organizations, to take measure to remedy violations indicated by examination, to impose both property or disciplinary liabilities within its competence on members of a self-regulatory organizations and in the case of administrative liability to transfer to relevant state organization for imposing liability;

73.1.7. to protect legal interests of members of a self-regulatory organizations;

73.1.8. to take measure to involve members of a self-regulatory organizations in the professional liability insurance;

73.1.9. other powers agreed by the Commission within the frame of law.

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73.2. A self-regulatory organization is entitled to demand any information except for confidential information defined in a law from its member organizations.

73.3. A self-regulatory organization is obliged to deliver any information related to activities of its members received from the Commission or from the other state organizations to each member of a self-regulatory organization.

73.4. A self-regulatory organization shall protect interest of customers of its own members through considering and settling the claim and complaint received from customers of its members.

73.5. A self-regulatory organization is obliged to implement the assignments issued to a self regulatory organization by the Commission.

Article 74. Registration of a self-regulatory organization

74.1. In case of recognizing the power of a self-regulatory organization and making decision to register a self-regulatory organization, the Commission consider the following criteria:

74.1.1. to have a membership of more than 30 percent of the total regulated persons with special license;

74.1.2. to be a legal entity established in Mongolia;

74.1.3. to have regulation and charter those consistent with the condition and requirements specified in Article 75 of this Law.

74.2. In the event that a self-regulatory organization does not satisfy the requirements specified in Article 74.1 of this Law, the Commission shall not fulfill the request regarding the registration of a self-regulatory organization.

74.3. In the event that a self-regulatory organization is no longer satisfy the requirements specified in Article 74.1 of this Law or the Commission removed registration of a self-regulatory organization, the power of the self-regulatory organization shall be terminated.

Article 75. Internal regulations and charter of a self-regulatory organization

75.1. The following provisions shall be reflected in internal regulations and charter of a self-regulatory organization:

75.1.1. requirements for its members and regulations and requirements of activities of its members;

75.1.2. procedures to examine activities of its members;

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75.1.3. regulation on recruitment, suspension and cancelation of membership of a self regulatory organization;

75.1.4. professional ethics norm of its members;

75.1.5. regulations regarding activities of councils and branches in the structure of a self-regulatory organization;

75.1.6. regulation to protect interests of a customer of member of a self-regulatory organizations;

75.1.7. regulation for training of its members and regarding arrangement and schedules of measures directed at improvement of a professional capacity of its members;

75.1.8. provision about measures to be taken in the field of preventing from fake activities or activities that misuse the securities market and measures to support the fair trading;

75.1.9. the regulation to settle the dispute through non-court procedure;

75.1.10. other issues specified in legislation.

75.2. The charter and internal regulations of a self-regulatory organization shall be developed by the Board of Directors of a self-regulatory organization and approved by the meeting of all members of a self-regulatory organization after introducing those charter and regulations to the Commission in preliminary review.

75.3. A self-regulatory organization is not entitled to approve any charter and regulations which are not endorsed by the Commission and demand the implementation of those charter and regulations from its members. The regulations on the review and endorsement of the self-regulatory organizations’ charter and regulations shall be approved by the Commission.

75.4. Unless specifically provided in the charter and regulations of a self-regulatory Commission, the charter and regulations approved by the meeting of all members of a self-regulatory organization shall come into force from the date of enactment of those charter and regulations and the members of a self-regulatory organization are obliged to comply with it from the date of enactment of those charter and regulations.

Article 76. Management and organization of a self-regulatory organization

76.1. The meeting of all members of a self-regulatory organization shall be the supreme governing body of a self-regulatory organization (“Members meeting”).

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76.2. The Members Meeting shall exercise the following rights and obligations:

76.2.1. to enact the charter of the self-regulatory organization, and make changes and amendments to the foregoing charter;

76.2.2. to discuss and approve the financial and operational report of a self-regulatory organization;

76.2.3. to elect and dismiss the executive director of a self-regulatory organization and to set the amount of salary of the executive director;

76.2.4. to determine the maximum limit of expenses of the executive director’s office;

76.2.5. to elect and dismiss members of Board of Directors of a self-regulatory organization, to define term of office of Board of Directors and to decide whether bonus/remuneration should be provided to members of Board of Directors with respect to function as member of Board of Directors;

76.2.6. to elect and dismiss members of Board of Supervisors of a self-regulatory organization, to define term of office of Board of Supervisors and to decide whether bonus should be provided to members of the Board of Supervisors with respect to function as member of Board of Supervisors;

76.2.7. to approve the annual budget of a self-regulatory organization and to set the amount of membership fee;

76.2.8. to approve the internal regulations.

76.3. The Board of Directors shall announce and organize the Members’ Regular Meeting once a year. Irregular meeting may be held at any time by the proposal of the more than 10 percent of total members of a self-regulatory organizations or through the proposal submitted by majority members of the Board of Directors.

76.4. The quorum of the Members’ Meeting shall be considered valid with the participation of majority of all the members, and the decision shall come into force by the majority participants of the meeting.

76.5. Procedures of the Members’ Meeting shall be reflected in the charter of a self-regulatory organization.

76.6. The supreme governing body of a self-regulatory organization between theMembers Meeting shall be Board of Directors which consists of nine members. The powers of the Board of Directors shall be established by the charter of a self-regulatory organization.

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76.7. Day to day activities of a self-regulatory organization shall be conducted by the executive director of a self-regulatory organization and unless otherwise provided in the charter of a self- regulatory organization, term of executive director shall be four years. The executive director may be elected for two terms.

76.8. The powers of the executive director shall be regulated by the charter of a self-regulatory organization.

Article 77. Relations between the Commission and a self-regulatory organization

77.1. The Commission is prohibited to intervene in the internal activities of a self-regulatory organization except on matters specified in legislations, rules and regulations.

77.2. A self-regulatory organization is obliged to inform the Commission in a prompt manner about its members those violated legislation and the charter and regulation of a self-regulatory organization and about violation by its members and measures taken in connection with the foregoing violations.

77.3. If the Commission deems necessary, the Commission may receive comments or opinions from a self-regulatory organization and other independent expert or professionals before making decision on any matters concerning interest of a self-Regulatory I=Organization and its members.

77.4. If the Commission deems necessary, the Commission may issue decision which demands to change the regulations and charter of a self-regulatory organization or which revokes the regulations and charter of a self-regulatory organization. The foregoing decision of the Commission shall immediately come into force upon its enactment.

Article 78. Recruiting member and canceling membership

78.1. Detailed regulation on the recruiting of members shall be established by the charter of a self-regulatory organization.

78.2. Application seeking membership shall be reviewed within 30 days and the decision whether to recruit or not shall be made by the Board of Directors of a self-regulatory organization.

78.3. The Board of Directors shall issue decision to cancel the membership in the following circumstances:

78.3.1. request was made by its member;

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78.3.2. the special license of a self-regulatory organization was invalidated;

78.3.3. member was violated the securities legislation and the charter and regulations of a self-regulatory organization.

78.4. If member who does not agree the decision to refuse to recruit or cancel the membership of a self-regulatory organization may file a claim to a court of Mongolia within 30 days after the issuance of such decision.

Article 79. Documents and review of documents

79.1 A self-regulatory organization shall register and document the membership registration and other required registration in compliance with form and rules determined by the Commission.

79.2 A self-regulatory organization shall submit the financial and operational report to the Commission within period determined by the Commission.

79.3 The Commission shall appoint an independent person who shall review and monitor financial documents of members of a self-regulatory organization.

79.4. A self-regulatory organization is obliged to provide relevant documents and clarifications demanded by the independent person appointed by the Commission under Article 81.3 of this Law.

Article 80. Responsibility of a self-regulatory organization

80.1. The Commission shall take the following measures in the event of a self-regulatory organization breached this Law and the regulations and charter of a self-regulatory organization:

80.1.1. to deliver warning;

80.1.2. to give assignment

80.1.3. to restrict some functions and activities of a self-regulatory organization;

80.1.4. to terminate a power of a self-regulatory organization through suspending and revoking the registration of a self-regulatory organization;

80.1.5. imposing liabilities specified in legislation.

80.2. In the event executive director or employee of a self-regulatory organization is found in breach of this Law, the regulations and charter of a self-regulatory

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organization, the Commission may deliver warning to those executive director or employee or give demand to a self-regulatory organization to suspend a right to conduct certain work or position of those executive director or employee. After the receipt of the demand from the Commission, the demand shall be reviewed and settled by the Board of Directors or by the Members Meeting within 60 days and report about the settlement of that demand to the Commission.

80.3. Relations concerning the transfer of memberships of a self-regulatory organization to other competent self-regulatory organization because of termination of power of a self-regulatory organization shall be regulated by the regulation approved by the Commission.

CHAPTER SIX

PROHIBITED ACTIVITIES AT SECURITIES MARKET

Sub-chapter eleven

Participating securities trading using inside information

Article 81. Inside information

81.1. Inside information shall mean any information which related to a securities issuer or securities and which was not disclosed to public and might seriously affect the value of such securities.

81.2. Even the analysis made on the basis of the information which was publicly disclosed might cause considerable change in the value of the securities, it shall not be considered as inside information.

81.3. The regulation specified in this chapter shall not apply to securities not registered with the Stock Exchange.

Article 82. Holder of inside information

82.1. The following persons shall be considered as holder of inside information:

82.1.1. person who knows that the information possessed is inside information;

82.1.2. person who acquired the information possessed through inside source.

82.2. The following circumstances shall be considered as acquiring the information from inside source:

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82.2.1. acquired the information as a director, employee and shareholder of a securities issuer;

82.2.2. acquired during the process of implementing his/her/its official duty;

82.2.3. acquired during the process of implementing agreement.

82.3. Despite the person specified in Article 82.2.1 of this Law became direct or indirect source of information, they will be considered as inside information holder.

Article 83. Prohibition to utilize inside information

83.1. Holder of inside information is prohibited from participating in the trading of securities and its derivative whose price might fluctuate due to such information.

83.2. In the following circumstances, holder of inside information shall be

considered as violated Article 83.1 of this Law:

83.2.1. despite the offer receiver knew the inside information, offered or convinced others to participate in the trading of floatable securities and its derivatives;

83.2.2. disclosed the information unless there is an obligation to disclose the information in terms of official position or official duty.

83.3. If any person conducted activities to trade registered securities and its derivatives, subscribed or acquired rights related to them, disposed, or agreed to dispose through its own or others account, or on behalf of any third person in accordance with Article 83.1 and 83.2 of this Law, it shall be considered as breach of Article 83.1 of this Law.

83.4. The breach which specified in Article 83 of this Law shall not serve as ground to revoke or not to implement an agreement and transaction.

Article 84. Disclosing the information for public

84.1. Securities issuer is obliged to immediately disclose to public of the events which might affect the asset and financial condition of it, trading activeness, and the price rate of securities, and as for the bond, events which might hinder the implementation of its payment obligation.

84.2. If the public disclosure might cause damage to the legitimate interest of the securities issuer, the Commission might release it from the obligation to publicly disclose at its own request.

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84.3. When disclosing the information specified in Article 84.1 of this Law to public, a security issuer shall inform the Commission and the trading organization at the same time.

84.4. The information shall be publicly disclosed as follows:

84.4.1. through the webpages of the trading organization or the Commission;

84.4.2. publish in accordance with prescribed procedures by the Commission;

84.4.3. ensure the accessibility of the information for interested person.

Sub-chapter twelve

Other forms of misusing market

Article 85. False transaction

85.1. If a transaction was conducted as if the securities trading is conducted actively and/or as for the securities price rate, directed at misleading the participants of the market, it shall be considered as conducting a false trading.

85.2. The following actions shall be considered as misleading as if trading is been conducted actively:

85.2.1. transaction to sell or purchase the securities between the affiliated persons or owner has not been changed has been conducted directly or indirectly, participated or offered to conduct;

85.2.2. to make offer, at the same time, to purchase similar number of securities for similar price upon collusion.

85.3. “Securities” as mentioned in this Article, shall include futures agreement

related to securities and option of the futures agreement.

Article 86. Misuse of market

86.1. If a person has conducted, or participated in conducting, directly or indirectly, two or more transactions related to certain securities, and such transactions are alone or jointly with other transaction, is creating, or could create the following circumstances, it shall be considered as misuse of market:

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86.1.1. increased the value of, or acted to increase the rate for the purpose of creating a condition for the purchasing, ordering or not selling of securities issued by a certain company or related company;

86.1.2. decreased the value of, or acted to decrease the rate for the purpose of creating a condition for selling or not purchasing the securities issued by certain company or related company;

86.1.3. held the value at certain level, or acted to hold the rate at certain level for the purpose of creating a condition for selling, purchasing, ordering or not selling, not purchasing, not ordering the securities issued by a certain company or related company.

86.2. “Securities” as mentioned in this Article, shall include futures agreement related to securities and option of the futures agreement.

Article 87. Having others conduct securities trading through deceit

87.1. If a person convinces other persons to order, sell, and purchase securities in the following manner, it shall be considered as having others conducted securities trading through deceit:

87.1. to issue and publish unrealistic, misleading, or false statements, promises and assumptions;

87.2. to conceal important events.

Article 88. Utilization of means and methods with an intention to deceive

88.1. If a person committed the following acts, directly or indirectly, related to concluding a transaction with other persons on the order, purchase and sell of securities, it shall be considered as utilization of means and methods with an intention to deceive:

88.1.1. utilized any kind of means and methods for the purpose of deceiving the person who is the other party to a transaction;

88.1.2. participated in activities with a intention to deceive the person who is the other party to a transaction, or in activities which might deceive others;

88.1.3. a person who is the other party to a transaction who has been misled due to false statements about real event.

Article 89. Having others conduct securities transaction through making false and misleading statement

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89.1. If a person makes the following statements on the securities, or the activities of the company, and the company’s past and future activities for the purpose of causing other persons to order, purchase and sell the securities of any other company, or keeping, increasing, decreasing or holding the securities of the company at certain level, it shall be considered as having caused other persons to conduct securities transaction through making false and misleading statement:

89.1.1. has introduced important events at certain times and conditions in

a false or misleading manner, and knew that it was false and misleading, or should have known ;

89.1.2. has created false or misleading conditions through omitting important events, and knew it or should have known.

Article 90. Obligation to re compensate the damage

90.1. A person who is found guilty of committing a violation specified in this chapter shall be held criminally liable, as well as is obliged to remedy the damage caused as a result of the purchase or sell of securities at changed value due to the act or transaction made by such person who has committed the violation at the demand of the claimant.

CHAPTER SEVEN

CONTROL, INSPECTION AND ENFORCEMENT OF SECURITIES MARKET

Sub-chapter thirteen

Control and inspection

Article 91. Power of the Commission to demand information

91.1. The Commission may demand the submission and certification of information required for the implementation of its powers specified in law within a certain time and in a certain from regulated persons in written, or if regulated persons is a company, from the holder of controlling shares, or from a person which have been or is associated with regulated person during the time of such event including associated company of the company, their directors, and employees.

91.2. The person specified in Article 91.1 of this Law is obliged to submit such information.

91.3. If this Article contradicts with other laws, this Law shall prevail.

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91.4. The Commission shall establish by regulations on the storage and transfer of confidential information of organization and individual to others acquired under this Article.

91.5. If a bank with a special license from the Bank of Mongolia is a joint venture company, Articles 91.1 and 91.2 of this Law shall equally apply to such bank.

91.6. A bank with a special license granted by the Bank of Mongolia as a member of union of regulated persons17, the Commission shall inform the Bank of Mongolia before it exercises its power specified in Article 91.1 of this Law.

Article 92. Permanent control

92.1. The Commission may continually examine the documents related to the business activities of regulated persons which relates to special license for the purpose of clearing whether regulated person or person which have been regulated is or have been in compliance with condition and requirements of this Law, regulations and rules issued by the Commission in conformity with thereon, special license and right.

92.2. For the purpose of exercising the control specified in this Article, the other persons specified in Article 92.1 of this Law is obliged to provide an opportunity to examine the document and present the required documents.

92.3. If a bank with special license issued by Bank of Mongolia is a joint stock company, the Articles 92.1 and 92.3 of this Law equally apply.

92.4. If the bank with special license issued by Bank of Mongolia is a member of association of regulated person, the Commission shall inform the Mongol bank before it exercises its powers specified in Article 92.1 and 92.3 of this Law, and conduct joint or single control and inspection.

92.5. An authorized official of the Commission shall inform the Bank of Mongolia of the inspection before exercising its power specified in Article 69.3.1 of a bank with a banking license and registered with the Bank of Mongolia and obtain [the Bank of Mongolia’s] permission.

Article 93. Inspection over the activities of Regulated person

93.1. The Commission shall monitor and conduct inspections on regulated persons and securities issuer’s activities to comply with this Law, relevant other legislation, and rules and regulation adopted in conformity with thereon, and a decision of the Commission.

17 See Article 4.1.35

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93.2. The control and inspection specified in Article 93.1 shall be implemented by an inspector appointed by the Head of the Commission.

93.3. The Commission, on its own initiative or on the basis of information

received from a citizen and a legal entity, or requests received from a foreign regulatory organization with a similar mission [as the Commission], may conduct inspection over the activities of regulated persons at any time if it considers that regulated persons violated this Law, relevant legislation, and rules and regulation adopted in conformity with thereof.

Article 94. Powers of the Inspector

94.1. An inspector shall have the following powers:

94.1.1. to oversee the implementation of the legislation on securities market, and submit the required issues a meeting of the Commission meeting for its consideration;

94.1.2. to obtain free of charge the information, report, analyses, explanation, reference and other documents required for the inspection work from the relevant regulated persons , and an explanation about them;

94.1.3. to temporarily suspend securities trading, or separate the securities if [the inspector] considered that the legislation on the securities market has been violated, or it has been established that such violation occurred;

94.1.4. to issue an act on the basis of the results of an inspection, to ensure its implementation, to issue tasks or demand remedy within a period time of the violations or faults, and ensure their implementation;

94.1.5. to impose liabilities specified in laws on regulated persons or securities issuer who violated the legislation on the securities market and failed to meet the criteria specified in Article 94.1.4 of this Law, to suspend their activities in whole or part, and if [the inspector] deems it necessary, to submit to the Commission a proposal to suspend or revoke the special license;

94.1.6. in the event that an attempt to violate the legislation related to the securities market by any person has been proven, as well as a violation has been established, to suspend the transaction of the account with the securities depository organization;

94.1.7. to freely access the facilities of the member of the union of regulated persons, or person holding or was holding the controlling block of regulated persons shares;

94.1.8. to examine the relevant document, or to obtain copy;

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94.1.9. to questions and obtain responses relating to the issue of the inspection;

94.1.10. if violations revealed by the inspection are criminal in nature, to transfer the relevant documents to authorized authority;

94.1.11. others specified in legislation.

94.2. The Inspector shall conduct its inspection in accordance with the guidance approved by the Head of the Commission and shall introduce regulated persons and securities issuer to the approved guidance in advance.

94.3. The Commission, if it deems necessary, when conducting the inspection, may have a person with a special profession and skill involved in the inspection.

94.4. A person, who possesses or is deemed by the inspector to have control over documents which contains or might contain information that relates to the inspection being conducted in accordance with this Article, is obliged to upon demand of the inspector, provide the documents within the demanded period and in prescribed form, to give additional explanations or clarifications about the document, to provide explanation at the inspector’s location within the demanded period and provide other possible assistance in the conduct of the inspection.

94.5. The inspection shall be organized not less than once a year and without causing any hindrance to the day to day activities of regulated persons and securities issuer.

Article 95. Prohibition of the destruction and damage of document

95.1. The person who knows or must know that the document is related to the control and inspection specified in Article 92 and 93 of this Law, is prohibited to damage, falsely produce, conceal, destroy, or create or permit the creation of such condition or intentionally avoid an inspection.

95.2. If the condition specified in Article 95.1 of this Law is found, it shall serve as ground for the Commission to revoke the special license of that regulated person.

Article 96. Making of a claim to liquidate

96.1. If the Commission considers that the liquidation of regulated person meets the interest of all the customers, it shall lodge a claim to liquidate the company in accordance with the relevant law.

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96.2. Upon considering the claim made by the Commission in accordance with Article 96.1, if the court finds regulated persons is in breach of this Law and the requirements of special license, it may issue the following decisions:

96.2.1. to restrict the acquisition and disposition of asset specified in the [court’s] decision being utilizing in any other way;

96.2.2. to appoint a receiver of regulated persons’ asset; 96.2.3. to determine the validity of the transaction and decide on the

outcome;

96.2.4. to order regulated persons to implement a court decision;

96.2.5 other issues specified in the claim of the Commission.

96.3. The Court shall issue decision specified in this Article in order not to cause unfair damage to third party.

96.4. The Court may give order to the Commission to deliver the statement about the receipt of the request to person which it considered necessary, or publish in a way considered appropriate, or to take both of the measures jointly, before issuing decision under the Article 96.1 of this Law.

CHAPTER EIGHT

MISCELLANEOUS

Sub-chapter fourteen

Miscellaneous

Article 97. Violation and Penalty

97.1. The following penalties shall be imposed in the event of violation or failure to implement any section of this Law, regulations and rules adopted in conformity thereof, and regulation of the trading organization, or provided intentional false and misleading material or statement, or intentionally hindered the member, employee and state inspectors of the Commission from implementing their obligation under this Law, failure to implement the demand of the Commission, committed or attempted to commit action contrary to the public interest:

97.1.1. for an individual, fine which equals to five to ten times the amount of minimum wage rate;

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97.1.2. for a company, fine which equals to twenty to forty times the amount of minimum wage rate.

97.2. Penalties specified in Article 97 of this Law may be imposed along with measures of suspension or revocation of special license.

97.3. Incomes earned through the violation of law by regulated persons shall be confiscated and the expenses incurred to the Commission in relation to the inspection of the violation shall be re-compensated by regulated persons.

97.4. The Regulated person shall pay the fine and other payments specified in

this Article within 36 days.

97.5. The Regulated person which fails to implement the decision within the period specified in Article 97.4 of this Law shall be considered as having committed violation.

Article 98. Liabilities for director and other officials

98.1. If a company is found to have violated this Law, and regulation adopted in conformity thereof through its action or omission made with the consent or participation of its employee, both the company and the employee shall be found guilty and held liable to compensate for their action.

98.2. An illegal action or omission of the representative who is conducting

activities in his official position or job on behalf of the special license holding company under this Law shall be considered as action or omission of the special license holding company and will be subject to liability.

Article 99. Dispute settlement commission 99.1. The dispute settlement commission shall be a non-employee18 unit of the

Commission which functions to settle the disputes that arise between the special license holder and customer on the action or omission of a special license holder.

99.2. The Commission shall establish the dispute settlement commission composed of its members and employees.

99.3. The composition and activities of the dispute settlement commission shall be established by a regulation adopted by the Commission.

18 Translator’s Note: If appears the intention is the commission is an unpaid posting and is meant to imply independence from the Commission.

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99.4. The dispute settlement commission shall receive complaints, inspect, and submit its proposal to a meeting of the Commission. The Commission shall issue any one of the following decisions upon hearing the proposal:

99.4.1. to approve the proposal;

99.4.2. to change the proposal;

99.4.3. to return the proposal to dispute resolution commission for reconsideration.

99.5. A decision of the Commission shall be final.

Article 100. Coming into force of the law

100.1. This law shall come into force on…………2011.

SPEAKER OF STATE GREAT KHURALOF MONGOLIA D.DEMBEREL

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