Introduction

1. The Astana Financial Services Authority (AFSA) has issued this Consultation Paper to invite public comments on the proposed amendments to AIFC Cooperation and Exchange of Information Rules (CO-OP Rules) to clarify some provisions related to the AFSA restrictions on regulatory co-operation. The proposed amendments are set out in the Annexure to this Paper.

2. The proposals in this Consultation Paper will be of interest to authorised persons, designated non-financial business or professions who are interested in doing business in the AIFC as well as financial regulators and state authorities who are interested in cooperating and exchanging information with AFSA.

3. All comments should be in writing and sent to the address or email specified below. If sending your comments by email, please use “Consultation Paper No 22” in the subject line. You may, if relevant, identify the organisation you represent when providing your comments. The AFSA reserves the right to publish, including on its website, any comments you provide, unless you expressly request otherwise. Comments supported by reasoning and evidence will be given more weight by the AFSA.

4. The deadline for providing comments on the proposals is 18 May 2019. Once we receive your comments, we shall consider if any refinements are required to this proposal.

5. Comments to be addressed by post: Policy and Strategy Division

Astana Financial Services Authority (AFSA)

55/17, Mangylyk El Avenue, block C-3.2, Nur-Sultan, Kazakhstan or emailed to: consultation@afsa.kz

Tel: +8 7172 613781

6. The remainder of this Consultation Paper contains the following:

(a) background to the proposal;

(b) the list of key elements of the proposed amendments;

(c) Annex 1: The proposed amendments to AIFC CO-OP.

Background

7. The Astana Financial Services Authority (AFSA) intends to become the IOSCO MMOU signatory to consult, cooperate, and exchange information with securities regulators - IOSCO signatories.

8. The IOSCO MMoU sets an international benchmark for cross-border co-operation. Established in 2002, it has provided securities regulators with the tools for combating cross-border fraud and misconduct that can weaken global markets and undermine investor confidence.

9. The IOSCO MMoU represents a common understanding among its signatories of how they should consult, cooperate, and exchange information for the purpose of regulatory enforcement regarding securities markets. The MMoU itself sets out the specific requirements for:

(a) what information can be exchanged and how it is to be exchanged;

(b) the legal capacity to compel information;

(c) the types of information that can be compelled;

(d) the legal capacity for sharing information; and

(e) the permissible use of information.

10. It also sets out specific requirements regarding the confidentiality of the information exchanged, and ensures that no domestic banking secrecy, blocking laws or regulations will prevent securities regulators from sharing this information with their counterparts in other jurisdictions.

11. Information requests can be made when authorities are in the process of investigating offences relating to the following activities under the relevant laws and regulations of the jurisdictions in question:

(a) insider dealing and market manipulation;

(b) misrepresentation of material information and other fraudulent or manipulative practices relating to securities and derivatives;

(c) solicitation and handling of investor funds, and customer orders;

(d) the registration, issuance, offer, or sale of securities and derivatives;

(e) the activities of market intermediaries, including investment and trading advisers who are required to be licensed or registered, collective investment schemes, brokers, dealers, and transfer agents; and

(f) the operations of markets, exchanges, and clearing and settlement entities

12. Under the terms of the MMoU, the securities regulators can provide information and assistance, including records:

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(a) to enable reconstruction of all securities and derivatives transactions, including records of all funds and assets transferred into and out of bank and brokerage accounts relating to these transactions;

(b) that identify the beneficial owner and controller of an account;

(c) for transactions, including the amount purchased or sold; the time of the transaction; the price of the transaction; and the individual and the bank or broker and brokerage house that handled the transaction; and

(d) providing information identifying persons who beneficially own or control companies;

(e) taking or compelling a person’s statement or, where permissible, testimony under oath, regarding the potential offence.

KEY ELEMENTS OF THE PROPOSED AMENDMENTS

13. A framework on cooperation and exchange of information was adopted by the AFSA Board of Directors in December 2018 to ensure that the AFSA meets international standards for co-operation and the exchange of information with regulators, including in particular the IOSCO MMoU and EMMoU.

14. The framework consists of high-level requirements in the AIFC Financial Services Framework Regulations and more detailed requirements in a separate set of rules, the Co-operation and Exchange of Information Rules (CO-OP). The framework specifies:

(a) a general prohibition on the disclosure of confidential information by the AFSA;

(b) a list of authorities to whom confidential information may be disclosed, or who may require assistance from the AFSA; and

(c) legitimate reasons why assistance may be requested.

15. To enhance the framework on cooperation and exchange of information, the AFSA proposes the following amendments to section 2.3 of CO-OP:

(a) Delete the “complying with the request would be so burdensome as to prejudice or disrupt the performance of the AFSA's regulatory functions and duties” provision (2.3(e)) as a ground for refusing a request of the requesting authority;

(b) Add the following provisions: “Where a request for assistance is denied, or where assistance is not available under the Acting Law of the AIFC or laws of the Republic of Kazakhstan, the AFSA will provide the reasons for not granting the assistance and consult pursuant to subsection 2.3.-1 (Consultation Regarding Mutual Assistance and the Exchange of Information).”

(c) Add new sub-section «2.3.-1. Consultation Regarding Mutual Assistance and the Exchange of Information» to meet the requirement of IOSCO MMOU for the Requesting Authority and Requested Authority to consult with one another in matters relating to specific requests made pursuant to the MMOU. Subsection «2.3.-1. Consultation Regarding Mutual Assistance and the Exchange of Information» contains the following provisions:

(i) the AFSA will consult periodically with other authorities, including Financial Services Regulators outside the AIFC, about matters of common concern with a view to improving its operation and resolving any issues that may arise.

(ii) the AFSA will consult with the requesting authority in matters relating to specific requests, including but not limited to requests that would be so burdensome as to prejudice or disrupt the performance of the AFSA's regulatory functions and duties.

Question: Do you have any comments on the proposed amendments to AIFC CO-OP Rules?

Annex 1