On 6 January 2023, the new Law on Capital Market started to apply in Serbia (except for certain provisions delayed further until the accession of Serbia to the EU). This law is adopted as a part of a comprehensive reform of the capital market legal framework in Serbia and introduces a completely new set of rules in line with the relevant EU regulations governing markets in financial instruments (MiFID I and MiFID II), prospectus, investor-compensation schemes, transparency, securities settlement, and market abuse.
In addition, a set of secondary regulations for the implementation of the new Law on Capital Market adopted by the Securities Exchange Commission (SEC) started to apply as of 6 January 2023. Belgrade Stock Exchange has also aligned its internal acts with the new Law on Capital Market with effect from 9 January 2023. The harmonisation of the acts of the Central Securities Depository and Clearing House is pending yet (it was due by 5 October 2022).
Broker-dealer companies and authorised banks had a deadline until 5 January 2023 to harmonise their internal acts with the new Law on Capital Market. Importantly, credit institutions which have provided ancillary services under the previous Law on Capital Markets without a license for an authorised bank (investment company) were obliged to obtain the license from the SEC until 6 January 2023 in order to continue to perform ancillary activities.
This includes, among other ancillary services, safekeeping and administration of financial instruments for the account of clients (custody services) and related services, such as cash/collateral management. If the credit institution failed to obtain such a licence from the SEC, it had to inform the SEC thereof but may continue to provide the following ancillary services: granting credits or loans to an investor for carrying out a transaction with one or more financial instruments, where the lender is involved in the transaction; and foreign currency conversion services connected to the provision of investment services. Provision of other ancillary services by the credit institution that has not obtained the relevant license from the SEC would be deemed the unlicensed provision of investment services, which is sanctioned as a criminal act.
The new law brings a number of other novelties in the legislative framework which market participants should consider going forward.
By Maja Jovancević Setka, Partner and Tijana Arsenijevic, Senior Associate, Karanovic & Partners