February 2013

New Rules for Conducting Inspections by the Financial Service Commission

On 27 November 2012 the National Commission for Regulation of Financial Services Markets (the "Financial Service Commission") adopted Regulation No. 2422 containing procedure for conducting inspections by the Financial Service Commission (the "New Inspection Rules"). The New Inspection Rules are effective from 26 February 2013.

Compared to the previously effective inspection rules dated 28 October 2003, the New Inspection Rules specify and classify types of inspections, specify grounds for scheduled inspections, extend grounds for unscheduled inspections, approve documents to be used by inspectors of the Financial Service Commission.

Pursuant to the New Inspection Rules, the inspections are classified as field and remote, scheduled and unscheduled, full-scope and limited scope inspections. Scheduled inspections are conducted depending on the type of inspected financial institution, but not more frequently than once a year (pursuant to the previously effective rules – unless otherwise was provided for by a special order of the Financial Service Commission).

The order for conducting inspection is issued for the term not exceeding 30 business days. The term of the inspection may be prolonged up to 15 business days based on a written substantiated request of the leading inspector (the previously effective rules did not regulate the duration of the prolongation term).

The list of grounds for unscheduled inspections has been extended and currently includes:

  • instructions of the President and the Cabinet of Ministers of Ukraine;
  • court decisions, decisions of authorities conducting pre-trial investigation;
  • necessity to check whether the inspected company complies with prescriptions issued by the Financial Service Commission;
  • inspections at other companies identified facts evidencing on violation of financial services laws;
  • the inspected company has not submitted the obligatory reporting documents to the controlling authority;
  • the inspection is conducted to verify incorrectness of the data included in the reporting documents or documents submitted for obtainment of the license;
  • a remote inspection identified a fact of violation of financial services laws;
  • a legal person or an individual filed a complaint on violation of financial services requirements and/or on recourse claim;
  • the inspected company undergoes reorganization or liquidation;
  • the inspected company refused to submit documents or information requested by the Financial Services Commission;
  • necessity of additional inspection arose during consideration of the case on financial services violation;
  • the controlling authority has information on absence of the company at the place of its registration;
  • the company filed an application on annulment of its license, exclusion from the State Register of Financial Institutions, other registers (lists).

Soon the financial market participants will be able to assess the effectiveness of the New Inspection Rules, as well as capability of the New Inspection Rules to secure observance of their lawful interests.

For further information please contact senior partner Armen Khachaturyan
and associate Oleh Furmanchuk

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