On investment and mutual funds (LRU-392-son)

25.08.2015

Law of the Republic of Uzbekistan

Adopted by the Legislative Chamber on June 29, 2015 Approved by the Senate on August 6, 2015

Chapter 1. General provisions

Article 1. Purpose of this Law

The purpose of this Law is to regulate relations in the field of investment and mutual funds.

Article 2. Legislation on investment and mutual funds

The legislation on investment and mutual funds consists of this Law and other legislative acts.

Relations in the field of activities of investment and mutual funds in a territory where a special legal regime has been established by a Constitutional Law of the Republic of Uzbekistan shall be regulated by rules other than those established by this Law.

Article 3. Investment fund

Legal entity — a joint-stock company issuing shares in order to attract investors' funds and invest in investment assets, is an investment fund.

An investment fund may be of the following type:

with an obligation to repurchase shares issued by him;

without obligation to repurchase shares issued by him.

The type of investment fund is indicated in the constituent documents of the fund.

Article 4. Mutual fund

A mutual fund is a combination of funds of two or more persons — investors, transferred by them to trust for the purpose of carrying out investment activities.

Mutual fund may be of the following type:

with the obligation to redeem issued investment units to the trustee at the expense of the fund;

without the obligation to repurchase issued investment units by the trustee at the expense of the fund.

The type of mutual fund is indicated in the mutual trust agreement.

A mutual fund is not a legal entity.

Article 5. Investment share

An investment share is an uncertificated security confirming the share of its owners in a mutual fund.

Rights to an investment share are confirmed by an extract from the custody account of the holder of investment shares issued by the Central securities depository.

Article 6. Investment assets

Investment assets are securities, shares, cash (including foreign currency), deposits and real estate that make up the investment portfolio of an investment or mutual fund.

Article 7. Name of investment and mutual funds

The full name of the investment or mutual fund should contain the phrase “investment fund” or “mutual fund”, respectively, and cannot be similar to the name of other investment and mutual funds. At the same time, the name of the mutual fund must contain an indication of the investment object (stock, bond, commodity markets, high technology and others).

Investment and mutual funds may have an abbreviated name.

Legal entities that are not investment funds are not entitled to use the phrase “investment fund” in their name.

The investment fund must have a round seal containing its full name in the state language and an indication of its location. The press may simultaneously indicate its name in any other language.

An investment fund has the right to have stamps and letterhead with its name, its own emblem.

Article 8 Trustee manager

A trustee manager is a legal entity that performs trustee management of investment funds and (or) mutual funds on the basis of a trustee management agreement.

A trustee manager is a participant of professional securities market.

The trustee manager must own at least 5% of the average annual value of the investment assets he / she owns (net of intangible assets).

Within the limits provided for by the trust agreement, the trustee manager, who has taken over the investment fund and (or) mutual fund, shall exercise the rights of the owner with respect to their (his).

The rights and obligations of the trustee are determined by law, the charter of the investment fund, the trust agreement and the position of the investment fund on the executive body.

The trustee is obliged to organize an internal audit service in the composition and procedure determined by its charter.

The trustee shall not have the right to acquire shares of investment funds and investment units of unit trusts under his management.

The trustee shall be liable to the owners of shares of the investment fund and investment units of the mutual fund in the amount of real damage in case of violation of the legislation on investment and mutual funds.

In accordance with the trustee management agreement, a fee is paid to the trustee at the expense of the investment fund and (or) mutual fund. The total amount and features of the payment of remuneration are determined by this agreement.

Article 9 Contract on trustee management

A trustee management agreement is an agreement concluded between a trustee and an investment fund or between a trustee and investors of a mutual fund, providing for restrictions on trustee management, the procedure for remuneration and expenses, the grounds and conditions for termination of the agreement, the liability of the parties and other provisions in accordance with the law.

A mutual fund trust agreement is an accession agreement.

Trustee management is carried out in accordance with the trustee management agreement, which is concluded by the head of the trustee manager:

with the chairman of the supervisory board of the investment fund based on the decision of the general meeting of shareholders;

with investors in a mutual fund by signing and joining it.

The conclusion of an agreement on trustee management of an investment fund at the same time with several trustees is not allowed.

The trust agreement must contain an investment declaration, which is an integral part of it and that sets forth the requirements for the composition of investment assets.

The term of the trustee management agreement for a mutual fund shall not exceed five years. If the owners of investment shares have not requested the redemption of all investment shares owned by them, by the decision of the general meeting of owners of investment shares, the term of the contract may be extended by one year.

Article 10. Investment declaration

The investment declaration must contain:

the purpose of the creation and implementation of the activities of an investment or mutual fund;

a list of investment assets in which money and other funds of an investment or mutual fund are invested;

description of investment risks;

information on the composition of investment assets that the trustee is required to maintain (the ratio between securities of various types and issuers, as well as between securities, cash and other investment assets);

the validity period of the provisions of the investment declaration, during which they are mandatory for compliance with the investment or mutual fund and the trustee;

provisions on the competence of the general meeting of holders of investment shares of a mutual fund, the rights and obligations of each owner of an investment share, as well as the rights and obligations of the trustee of a mutual fund.

The investment declaration of the investment fund, including amendments and additions to it, is approved by the decision of the general meeting of shareholders of the investment fund.

An investment declaration, including amendments and additions to it, shall be submitted to the authorized state body for regulation of the securities market within ten calendar days from the date of its approval.

The investment declaration of a mutual fund, including amendments and additions to it, is approved by the decision of investors (owners of investment shares) of the mutual fund.

Chapter 2. Investment Fund

Article 11. Creation of an investment fund

An investment fund is created by establishing a new legal entity or by reorganizing another investment fund. The creation of an investment fund by reorganization of another legal entity that is not an investment fund is not allowed.

The investment fund is a commercial organization and owns separate property, including property transferred to it in the authorized capital.

The founders (shareholders) of an investment fund may be legal entities and individuals.

State registration of an investment fund shall be carried out by Public Services Centers.

Payment for the value of shares of an investment fund upon its creation is made in cash, securities, shares, as well as real estate and other property, property rights. At the same time, at least 75 percent of its authorized capital must be paid in cash.

The placement of shares of an investment fund is carried out on the stock exchange, except for shares of the initial issue, placed by private subscription among its founders.

Article 12. Management bodies of the investment fund

The management bodies of the investment fund are the general meeting of shareholders and the supervisory board, as well as the executive body, the powers of which are carried out by the trustee.

Article 13. Restrictions on the activities of an investment fund

An investment fund may not:

issue corporate and infrastructure bonds, as well as preferred shares;

invest more than 10 percent of the net assets of the investment fund in securities of one issuer or in the shares of a limited liability company;

attract credit and (or) borrowed funds if the total amount of debt to be repaid exceeds 15 percent of the value of the net assets of the investment fund as of the date of signing the loan and (or) loan agreement (the term of the loan and (or) loan may not exceed three months);

be a guarantor, mortgage property or property rights;

make investments in securities and shares of business entities, the legal form of which provides for additional liability of their participants;

make investments in securities issued by the trustee, audit organizations, as well as acquire shares in their authorized capital;

acquire and have shares in other investment funds;

enter into transactions not related to investment activity, acquire options or futures;

make investments totaling more than 10 percent of the fundʼs net assets (except for investments in securities).

Article 14. Features of the reorganization and liquidation of the investment fund

An investment fund may not be transformed into other legal forms of a legal entity without terminating its activity as an investment fund.

In the absence of a trustee, the supervisory board of an investment fund must hire a trustee within three months or initiate the liquidation of the investment fund.

Article 15. Accounting and storage of investment fund property

Accounting for rights to securities issued and owned by investment funds, as well as their storage, is carried out by the Central securities depository, unless otherwise provided by law.

Investment assets are recorded with the trustee on a separate balance sheet and are independently accounted for. For settlements on activities related to trustee management, a separate bank account is opened.

Accounting and financial, tax and other reporting of the investment fund are carried out by the trustee.

The trustee shall keep a separate record of the fundʼs investment assets, ensure their integrity and safety, and also bear responsibility for the correctness and reliability of the financial, tax and other statements of the investment fund.

Chapter 3. Mutual fund

Article 16. Creation of a mutual fund

The decision to create a mutual fund is made by the trustee.

The investor contributes funds to the mutual fund on the basis of an agreement with the trustee, providing for the pooling of investor funds in the mutual fund on the basis of common ownership.

The trustee shall issue investment units to investors within two business days after they deposit funds into his separate bank account.

Investment units are placed at a single price for all investors.

Mutual fund funds are invested in accordance with the investment declaration.

Revenues received in the process of trustee management of a mutual fund are accumulated in a separate bank account of the trustee manager.

A mutual fund is considered created from the moment it is included in the Unified register of mutual funds and the publication of relevant information on the official websites of the authorized state body for regulating the securities market and the Central securities depository.

The Unified register of mutual funds is maintained in the manner established by the authorized state body for regulating the securities market.

Article 17. Accounting for a mutual fund and investment shares

The accounting of a mutual fund is carried out by the Central securities depository by registering investment units after inclusion of the mutual fund in the Unified register of mutual funds.

Investment units are subject to registration within a week from the date of the decision to create a mutual fund.

When registering investment units, investors open custody accounts with the Central securities depository, which record the rights to their investment units.

Article 18. Disposal of investors' cash and investment assets of mutual funds

The trustee shall have the right to manage the funds of investors after registration of a mutual fund at the Central securities depository.

Cash of a mutual fund are spent on the basis of a payment document signed by the head of the trustee and an authorized official of the Central securities depository.

The goals and directions of the use of cash and other investment assets must comply with the terms of the trust agreement, including the investment declaration.

Income received on investment assets is distributed once a year among the owners of investment units of a mutual fund or reinvested by agreement of all owners of investment shares. Payment of income to the owners of investment units of a mutual fund is carried out by the trustee.

Contracts concluded by the trustee on behalf of and at the expense of the mutual fund are subject to registration with the Central securities depository.

Article 19. Restrictions on the disposal of investment assets of a mutual fund

Funds of a mutual fund cannot be:

invested in the amount of more than 10 percent of the fundʼs investment assets in securities of one issuer or in the shares of a limited liability company;

invested in securities and shares of business entities, the legal form of which provides for additional liability of their participants;

invested in securities issued by the trustee, audit organizations, as well as on the acquisition of a share in their authorized capital;

used in areas not related to investment activity;

invested in a total amount of more than 10 percent of the fundʼs investment assets (other than investing in securities).

Article 20. Circulation of an investment Unit

The investment unit is circulated by buying and selling it on the stock exchange and performing other actions leading to a change in the ownership of the investment unit.

The trust agreement may provide for the possibility of exchanging investment units of a mutual fund at the request of their owner for investment units of another mutual fund that is in trustee management of the same trustee. In this case, the exchange of investment units of one mutual fund for investment units of another mutual fund may be carried out only if the maturity date of the investment units to be exchanged coincides with the date of issue of the investment units for exchange.

Article 21. Termination of the mutual fund

The termination of the mutual fund is carried out in case of:

expiration of the trust agreement;

receipt of applications for redemption of all investment units;

cancellation of the license of the trustee, if his rights and obligations under the trust agreement of this fund within three months from the date of cancellation of the license are not transferred to another trustee;

achieving the goals of its creation and implementation of activities specified in the documents of the mutual fund;

the presence of a unanimous decision by the owners of investment units to terminate the unit fund.

Investment assets of a mutual fund are subject to disposal by the trustee on the stock exchange (for securities) and public trading. Funds received from the sale of investment assets of a mutual fund shall be payable to the owners of investment shares of a mutual fund in proportion to the number of investment shares held by them.

The unanimous decision of the owners of investment units of a mutual fund to establish an investment fund on its basis shall be recognized as a decision to terminate the mutual fund.

Upon termination of the mutual fund, the activities of the trustee of this mutual fund shall be subject to mandatory audit by an audit organization.

Article 22. Redemption of an investment unit

Redemption of an investment share is made upon termination of the mutual fund.

Redemption of an investment share may be made by:

payment of its value in cash to the trustee at the expense of the mutual fund;

converting an investment share into shares of an investment fund formed on the basis of a mutual fund.

Chapter 4. Regulation of the activities of investment and mutual funds

Article 23. Implementation of regulation of the activities of investment and mutual funds

Regulation of the activities of investment and mutual funds is carried out by the authorized state body for regulation of the securities market by:

establishing procedures for the trustee management of investment and mutual funds, including keeping records of their investment assets and disclosing information about their activities;

restrictions on the participation of officials and affiliates of the trustee in the operations of investment and mutual funds;

establishing requirements for the contents of the investment declaration and other documents of investment and mutual funds;

monitoring the activities of investment and mutual funds, trustees and the Central securities depository.

An agent for the issue, redemption and exchange of investment units may only be the Central securities depository, acting on behalf of and at the expense of the trustee on the basis of an agreement concluded with the trustee. The procedure for the Central securities depository to issue, redeem and exchange investment units is established by the authorized state body for regulating the securities market.

Article 24. Accounting and reporting of investment assets

The accounting of investment assets and reporting on them are carried out by the trustee.

When making investments using the funds of a mutual fund, the trustee shall be indicated in the register of securities owners and constituent documents of business entities, with a note that it acts as the trustee of the mutual fund.

Article 25. Disclosure of information on the activities of investment and mutual funds

Disclosure of information on the activities of investment and mutual funds is carried out by a trustee by:

publication of information on the official websites of investment funds, the trustee manager of mutual funds, the authorized state body for regulating the securities market, and the stock exchange in accordance with the law;

providing information on request in the prescribed manner.

The authorized state body for regulating the securities market and the stock exchange shall not be entitled to charge for the publication on their official websites of the information provided for in this article.

Chapter 5. Final provisions

Article 26. Settlement of disputes

Disputes in the field of investment and mutual funds are resolved in the manner prescribed by law.

Article 27. Responsibility for violation of the legislation on investment and mutual funds

Persons guilty of violating the legislation on investment and mutual funds are liable in the prescribed manner.

Article 28. Bringing legislation into line with this Law

The Cabinet of Ministers of the Republic of Uzbekistan:

to bring government decisions in accordance with this Law;

to ensure the review and cancellation by government bodies of their normative legal acts that contradict this Law.

Article 29. Entry into force of this Law

This Law shall enter into force on the day of its official publication.

The provisions of Chapter 3 of this Law shall enter into force on July 1, 2017.

President of the Republic of Uzbekistan I. KARIMOV

Tashkent city,

August 25, 2015,

No. LRU-392