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New Securities Act

A new Securities Act (Official Gazette of RS, 47/06) will apply from December 11 2006 in Serbia. The main reasons for the revisions to the Securities Act are its rather vague and often unresolved provisions and the fact that the Act is not fully harmonized with general corporate and financial laws in Serbia.

The general structure and subject matter of the new Securities Act has not been radically changed from that of its predecessors. However, takeovers, which were previously included in the Securities Act, are now regulated separately by the new Takeover Act (Official Gazette of RS, 46/06), which becomes effective at the same time as the new Securities Act.

The new Securities Act also introduces other changes to the legal framework relating to securities and financial markets in Serbia. For example, the new Securities Act adds much more detail to the regulatory framework governing issues such as public offerings, offering securities of foreign legal entities in Serbia, reporting requirements for public companies and insider-trading rules. More detailed rules are provided as to the legal status and authorized scope of activities of certain market participants in Serbia, such as brokerage firms and brokerage and custody banks, and on the legal status and competences of institutions such as the Serbian Securities Exchange Commission and the Central Registry of Securities.

The new Securities Act introduces the possibility of setting up an over-the-counter securities trading market (OTC). An OTC market organizer must fulfil basically the same conditions as those that apply to the stock exchange, except that the minimum capital requirement is set at the lower threshold of €750,000 (compared with €1 million for the stock exchange).

The Act also introduces the possibility of private placement of securities to existing shareholders and the issuer's employees, a problematic deficiency of the previous Securities Act that caused great inconvenience in practice.

The Serbian legislators will surely continue to further refine the various areas of law that govern financial markets in Serbia, but the new Securities Act is a certainly a positive step forward in providing clearer guidelines and more uniform rules and principles for more efficient market operations.

Nikola Jekic and Maja Stankovic

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