Uzbekistan proposes issuer rating system to strengthen capital market transparency
Uzbekistan's National Agency for Perspective Projects (NAPP) has unveiled a draft regulation proposing an issuer rating system to bolster capital market transparency. This system aims to evaluate companies based on their adherence to capital market laws and their level of transparency.
The draft, accessible on the regulatory legal acts discussion portal, seeks to establish a standardized framework for assessing issuers within Uzbekistan's securities market. NAPP, acting as the nation's capital market regulator, would be responsible for administering this rating system.
Under the proposed regulation, companies would be judged on their compliance with legislation governing the securities market, joint-stock companies, and shareholder rights, alongside the transparency of their operations.
NAPP intends to release these issuer ratings quarterly via the Unified Corporate Information Portal. Ratings for each reporting quarter are slated for publication by the fifth day of the second month following the quarter's end. For instance, first-quarter ratings would be available by May 5.
Annual ratings, derived from companies' annual reports, would be published by July 20 of the subsequent year. The draft includes provisions for exceptions if annual shareholders' meetings lack the necessary quorum to approve these reports.
The proposed methodology assigns penalty points across seven violation categories. Companies would incur 15 points for late report submissions and another 15 points for failing to disclose material information. Violations related to securities payments, such as dividends or bond income, and the provision of false information would each result in 10 penalty points.
Further penalties include 10 points for breaches of corporate governance procedures, including issues with governing body meetings. Substantiated complaints would lead to five to 10 points, depending on their frequency. The most severe penalty, 30 points, would be imposed for non-compliance with orders or decisions issued by the regulator.
Based on accumulated penalty points, issuers would be categorized into one of four groups. Category A, signifying full regulatory compliance, would be assigned to companies with 10 points or fewer. Issuers with 15 to 25 points, indicating a limited number of violations, would fall into Category B. Category C would encompass companies scoring between 50 and 60 points, pointing to systemic deficiencies in disclosure or regulatory adherence. Finally, Category D would apply to issuers accumulating between 65 and 100 points for serious violations.
The draft also links these rating categories to potential supervisory actions. Companies in Category B would receive warnings through their personal accounts on the Unified Corporate Information Portal, mandating the implementation of preventive measures.
Issuers in Category C could face restrictions, including the refusal to register new securities issues and limitations on publishing information through the unified disclosure system.
For companies assigned to Category D, the regulator would possess the authority to suspend trading in their securities or demand the early redemption of outstanding bonds.
NAPP states that the proposed rating system aims to enhance transparency, improve compliance with capital market regulations, and strengthen investor protection by establishing a structured approach to monitoring securities issuers' activities.