The organization and functioning of the securities exchange is governed by the Law on the Issuance and Trading of Non-Government Securities issued on 19 October 2007 (Securities Law), its implementing Sub Decree № 54 dated 8 April 2009 (Securities Sub Decree) and Law on Government Securities dated 10 January 2007 (Government Securities Law), and is supported by about 30 implementing regulations issued by the SECC.
Securities Market Operator, Clearance and Settlement Facility Operator and Securities Depository Operator
Securities market operator, clearance and settlement facilities operator, and securities depository operator are separately licensed by the SECC. However, except for the securities market operation, approval is not required from the National Bank of Cambodia for the operation of securities clearance and settlement facilities or securities depository. The securities market, depository, and clearance and settlement operator was licensed on 28 February 2011 to only one company, Cambodia Securities Exchange (CSX), which is 55% owned by the Cambodian Government and 45% owned by South Korean Exchange (KRX).
Securities Firms
Securities firms, including underwriters, dealers, and brokers are traders of securities in the securities market under their own account or on behalf of their client. The securities firms must be licensed by the SECC. Certain securities dealers, however, will be exempt from such licensing requirements in relation to the trading of certain exempt securities transaction, but details of this have yet to be made available.
Currently 15 securities and investment advisory firms have been licensed by the SECC for an initial term of two years dating from 19 October 2010. The licenses may be renewed multiple times in three year intervals. Seven licensed underwriters include Tong Yang Securities (Cambodia) Plc., OSK Indochina Securities Ltd., CANA Securities Limited, Campubank Securities Plc., Cambodia-Vietnam Securities Plc., SBI Phnom Penh Securities Ltd., and Phnom Penh Securities Firm Plc. The two licensed dealers are Sacombank Securities (Cambodia) Plc., and Golden Fortune (Cambodia) Securities Plc. Four brokers consist of ACLEDA Securities Plc., Cambodia Capital Securities Co., Ltd., Sonatra Securities Plc., and CAB Securities Ltd. Angkor VDS Securities Plc., and Angkor Capital Advisor are the two investment advisory firms licensed by the SECC.
Earlier this year, the SECC accredited three companies to be securities registrar, cash settlement agent, transfer agent and paying agents and Pricewaterhouse Coopers Cambodia Ltd., KPMG Cambodia Ltd., and BDO Cambodia Limited, were accredited by SECC as qualified auditors for the issuer.
Private Placement or Initial Public Offering (IPO)
Securities may be issued under the form of private placement or public offering. Private placement may be made only if (i) the total number of people to whom the offer is less than or equal to 30; and (ii) the offering shall not be publicly advertised by any means, which includes advertising for the purpose of offering advice or information on the securities investment. Private placement does not require authorization from the SECC, but the SECC must be notified when a private placement is completed, the results of which must be reported as well. Please note that to date no comprehensive guideline or regulation has been adopted to regulate the private placement.
Securities cannot be publicly issued and traded unless they are authorized by the SECC after all requirements are satisfied. An IPO can only be made if an issuer complies with the following: (i) is a public limited company: (ii) has a shareholders’ equity of at least KHR 5 billion (US$1.25 million); and (iii) has a net profit of at least KHR 500 million (US$125,000) and the aggregate of net profit of at least KHR 1 billion (US$250,000) for the last three fiscal years.
IPO Process
Before starting the process, the issuer must engage an underwriter to advise the issuer on compliance with the requirements mentioned above, to prepare the prospectus, to determine the amount of issued securities and the issued price. Next, the issuer must file an application with the CSX to review whether or not it’s eligible for listing on the CSX. After the CSX confirms the listing eligibility of the issuer, the issuer will file and submit an application to the SECC for an IPO. After the SECC issues approval in-principal on the IPO, the issuer prepares and submits the terms and conditions including the securities pricing to be approved by the CSX and then by the SECC. Then newly issued securities, at least 20% of which must be reserved for Cambodians and the other 80% for the general public (foreign or Cambodians), are offered to and subscribed by the public. The underwriter itself is required to subscribe the outstanding newly issued securities after the end of the subscription date. At the end of the IPO, the issuer is required to register with the CSX so that its securities may be traded.
If you have any questions about this Legal Update, please send us an email to: cambodia@dfdl.com
1 September 2011
