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A broker – a natural person who executes securities transactions on behalf of an employer brokerage company and/or conducts other related activities. LAW OF GEORGIA ON SECURITIES MARKET regulates relations associated with the public offering of securities and their circulation, and determines the rules of activities and responsibilities of stock exchanges, central depositories, securities registrars, brokerage companies, brokers and investment funds on the securities market, as well as additional requirements for the rules of the activities and responsibilities of those companies whose securities are publicly offered and sold. A brokerage company – a legal person that has a license for brokerage activity.
Video Vlog About Brokerage Licensing in Georgia
Activities of a brokerage company
A brokerage licence authorises a brokerage company to engage in operations and services related to equity share, shares, bonds, certificates, bills of
exchange, cheques and other securities, and as such a brokerage company may:
a) direct consultations to investors on investments, including the price of securities, investment in securities, trading in securities and related foreign
exchange transactions;
b) conduct research related to financial instruments and their issuers and ensure the dissemination of the research results and/or recommendations on
investments strategies;
c) provide consultations to issuers on the issuance of securities and the attractiveness of investments;
d) prepare and distribute an issuer’s securities on a non-guaranteed basis;
e) receive and transmit clients’ orders related to securities, and conduct securities transactions with a clients’ funds in their interests;
f) manage clients’ investment portfolios, including pension schemes, and funds allocated for operations in securities;
g) store and record clients’ investment funds and/or securities, as well as provide services to a nominee holder of securities, and open cash and securities
accounts for clients for this purpose and conduct operations on those accounts;
h) enter into securities transactions in their own interests with their own funds;
i) prepare and distribute an issuer’s securities on a guaranteed basis;
j) lend and borrow securities to and from clients, as well as use their own funds for the acquisition of securities for clients, and participate in ‘short selling’ in accordance with the procedure established by the Agency.
k) Trade in foreign currency;
I) Conduct other operations related to financial instruments, and shares in an entrerpeneurall company and exercise other powers provided for by this law.
License conditions for a brokerage activity
An applicant seeking a license for a brokerage activity shall submit an application to the Agency, accompanied by the documents prescribed by Article 9 of the Law of Georgia on Licenses and Permits, as well as by information and documents:
a) confirming that the applicant is registered as a limited liability company or a joint stock company under the Law of Georgia on Entrepreneurs;
b) confirming that none of the members of its governing body or its significant shareholder has been convicted for a serious or particularly serious crime, or for the financing of terrorism and/or the legalisation of illicit income, or other economic crimes; and that none of the members of its governing body has been deprived of the governing body membership rights or been subject to administrative sanctions for gross violation of the legislation on securities during the past five years;
c) on the compliance of members of the governing body with the eligibility criteria laid down in accordance with the procedure established by the Agency;
d) the compliance declaration of a beneficial owner of a significant share determined in accordance with the procedure established by the Agency;
e) its charter, internal regulations and rules, which;
e.a) include procedures concerning membership, trade, admission to trade, dispute settlement and other rules required in accordance with this Law; e.b) require a fair, reasonable and equitable attitude towards all members or membership candidates of a stock exchange;
f) on the possession of the minimum amount of equity capital prescribed by the Agency (where such requirement exists);
g) an annual or semi-annual financial statement of the last year (whichever is the most recent), verified by an auditor and prepared in accordance with the procedure established by the Agency. An applicant seeking a securities registrar license shall submit a current financial statement verified by an auditor, if it has applied for obtaining the license no later than half year since the day of its establishment;
h) a document (documents) on the minimum amount of equity capital deposit on the bank account (accounts) prescribed by the Agency from a bank licensed in Georgia;
i) on the compliance of its organisational structure and technical means with the procedure established by the Agency (where such regulations exist); j) the names of significant partners (shareholders) and the number of shares held by each;
Duties of brokerage companies and of brokers
1. A brokerage company shall maintain separate accounts to separate its own assets from the securities and monetary funds of its clients.
2. All agreements between a brokerage company and its clients shall be made in writing.
3. Brokerage companies and brokers shall ensure the execution of their clients’ orders under the best terms and conditions existing on the market in accordance with the procedure laid down by the Agency: they shall not compete against clients’ orders, or manipulate prices or costs in connection with the execution of clients’ orders or execute clients’ orders at such a price and cost as to be less advantageous for the client.
4. A broker shall be prohibited from giving knowingly misleading recommendations and information to clients on behalf of the brokerage company. A brokerage company shall provide information on the suitability of investments, and potential conflicts of interest of a brokerage company or a broker and about the financial condition of the brokerage company.
5. A brokerage company shall notify the Agency in writing within seven days after the occurrence of a relevant event or after making the relevant
decision on:
a) opening and closing a branch office;
b) changing the name of the brokerage company.
6. A brokerage company shall obtain prior consent on reorganisation from the Agency. The Agency may refuse to give its consent on reorganisation to the brokerage company if the reorganisation poses a threat to clients’ monetary funds and/or his/her/its securities entrusted to the brokerage company.
