1. 1 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 9 – Financial Services Bilateral screening: Chapter 9 PRESENTATION OF MONTENEGRO Brussels, 10 June 2013

2. 2 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services MARKET ABUSE Milivoje Popovic Securities and Exchange Commission of Montenegro mpopovic@scmn.me mpopovic@scmn.me

3. 3 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services CONTENT  Relevant Acquits  Legal framework  Institutional Framework  Sanctions  Assessment of compliance  Convergence dynamics

4. 4 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services RELEVANTE ACQUITS o Directive 2003/6/EC of 28 th of January 2003 on insider dealing and market manipulation (market abuse)

5. 5 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services LEGAL FRAMEWORK Law on Securities (Official Gazette of Republic of Montenegro no. 59/00 and 28/06 and Official Gazette of MNE no. 53/09, 73/10, 40/11 and 06/13 ) Rules on control of securities business (Official Gazette of MNE no. 28/07, 19/12, 09/13) Montenegro Stock Exchange Rules (adopted on August 20 th, 2012)

6. 6 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services LEGAL FRAMEWORK Main provisions: Inside information- Art. 102 of the LS bans the trading in securities in cases where the person involved in the trading is in possession of any unpublished information that if published would materially affect the price of the securities. (the definiton largerly satisfies the requirements stated in the definition of inside information provided in Art. 1 of the Directive) Market manipulation- Art. 103 of the LS prohibits all persons to do anything with the intention of creating, a false or misleading appearance of the volume of trading in any securities on any securities market or the price of any such securities. In addition according to Art. 105 no person should induce or attempt to induce another person to invest in securities by making or publishing any statement, promise or forecast that he knows to be misleading, false or deceptive. (the requirements from the Art. 5 of the Directive are completely satisfied)

7. 7 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services LEGAL FRAMEWORK Publication of inside information- according to art. 27 of the LS every issuer of securities that are publicly offered keeps the general public informed as soon as reasonably practicable of any information which: – is necessary to enable them to appraise the financial position of the issuer and of its subsidiaries; – may lead to establishing of false market in its securities; or – might reasonably be expected materially to affect market activity in the price of its securities. (the requirements from the Art. 6 of the Directive are satisfied) Obligation of the market operator to adopt structural provisions aimed at preventing and detecting market manipulation practices- According to art. 52 of the LS the Rules of the stock exchange need to ensure that the business conducted by the exchange will be maintained in an orderly manner and so as to afford proper protection to investors. (the requirements from the Art. 6 of the Directive are satisfied)

8. 8 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services INSTITUTIONAL FRAMEWORK Competent authority in Montenegro The Montenegro Securities Commission (SEC) is the authority, empowered by the Law on Securities to regulate and supervise the securities market. SEC is an independent organisation with the legal personality. Sufficient supervisory and investigatory powers of the competent authority- The SEC is vested with all powers needed to effectively supervise the Montenegrin market as regards the MAD provision. All the powers listed in art. 12 para 2 of MAD are at the SEC disposal according to art 16 and art. 22 of the Rules on the Control over Securities Business. International cooperation- SEC is a full signatory of the IOSCO MMoU and as such meets the highest standards in supervisory cooperation.

9. 9 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services SANCTIONS Breaches –A fine of 2,500 euros to 20,000 euros shall be imposed on a legal person in case of market manipulation and abuse of inside information (Art. 113 LS). Administrative measures – SEC has the power to impose coercive administrative measures such as ceasing the trading in a particular issue, requiring information disclosure, suspending a license or making public a sanction imposed ( LS and Rules on control of securities business. Right of appeal – all decision (measures) of the SEC are appealable in front of the Administrative Court of Montenegro (Art. 10 (5) of the LS).

10. 10 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services ASSESSMENT OF COMPLIANCE o Current status: Montenegrin legislation is largely compliant with the principles of Directive. o Gaps identified:  Obligation of any person professionally arranging transactions in financial instruments who reasonably suspects that a transaction might constitute insider dealing or market manipulation to notify the competent authority. This obligation is not recognized in the LS.  Exceptions from the requirements of the directive - The participants in the Montenegrin market are not granted opportunity to diverge from the LS requirements in the cases of trading in own shares in ‘buy-back’ programmes or to the stabilization of a financial instrument

11. 11 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services CONVERGENCE DYNAMICS o According to the Government of Montenegro agenda for 2013, the New Law on Capital Market will be adopted by the end of the fourth quarter of 2013, in which the full compliance with the Directive 2003/6/EC will be reached. o The adoption of amendments to the Criminal Law is in parliamentary procedure, where prohibition of market manipulation and use, disclosure and recommendation of inside information will be defined as criminal offenses.

12. 12 Thank you for your attention! QUESTIONS