The 1996 Law No. CXI on the Issue of and Trading in Securities, the
Stock Exchange and Investment Services (the Securities Law) entered
into effect on January 1 1997. It regulates the different forms of
investment services as well as the subject matter of these services
(ie, securities, derivatives, etc) and sets forth the requirements
to be met by an investment services company as regards its legal
form under company law. In accordance with these provisions,
investment services may be rendered by securities commission firms,
securities trading houses and special investment firms, the scope
of services they may offer depending on their legal form. Other
market participants which do not have the status of such a
securities commission firm, securities trading house or investment
services firm are subject to various restrictions as regards the
provision of investment services defined in the Securities Law.
For example, in the past banks were only allowed to trade in
government securities and securities not sold on the open market.
Apart from that, they were also allowed to engage in certain
transactions involving derivatives, but they did not have the right
to engage in normal securities commission transactions or in
proprietary trading in stocks. For this reason many banks
established investment services subsidiaries through which they
transacted brokerage operations.
Pursuant to Law No. CLI, which was passed in 1997, the
Securities Law was amended as of January 1 1999, to the effect that
banks are now allowed to freely engage in investment services
regulated under the Securities Law.
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