The New So-Called Law on Commission, or Where a Lazybone Is Paid Half A Million

By a strange coincidence, a few days after the publication of our article on the ineffective activity of the National Securities and Stock Market Commission (NSSMC), the latter tried to at least whitewash itself a little by “reporting” on its achievements. Traditionally, they have come to promises of a better future immediately after the adoption of the new "commission law".

We fact-checked the updated edition. And suddenly it turned out that the social harm from the NSSMC is much more serious than it seems at first glance.

“If the Law on Commission is adopted, the country, investors and market participants will experience qualitative changes regardless of when the war ends,” members of the regulatory body say. Well, this ambitious claim is partially true. Indeed, the quality of regulation is being changed: there are unconditional and sometimes open-ended powers, new fines are added, the right to do whatever the members of the regulatory body like, new salaries for them and, of course, another round of constitutional abuse.

Let’s analyze these facts step by step.

Fact number 1. The text of the draft law is being hidden

For example, the website of the Parliament of Ukraine still lacks the text of the so-called Law on Commission (aka draft law No. 5865) before the second reading, although it was introduced as early as April 21, 2023. For example, the National Commission almost every day announces changes to the draft law on virtual assets and promises to make them open for public discussion – since we raised this issue. But there are no sensitive aspects in that draft law, it can be made public and discussed, but the draft about the commission itself is prohibited.

Of course, we obtained and analyzed those 940 pages of draft law No. 5865.

Fact number 2. Unconstitutionality is being cemented

As we have already explained, the current NSSMC was created in an unconstitutional way, and this needs to be corrected, at least for the sake of legitimizing the work of this body. Instead, the new version of the law proposes to set out its unconstitutional status. Contrary to the principle of separation of powers in accordance with Article 6 of the Constitution, the amendments propose to keep the President’s right to appoint members of the NSSMC.

In addition, the right of the National Security Council and the Committee of the Verkhovna Rada on Finance, Customs and Tax Policy to participate in the formation of the competitive commission for the selection of members of the NSSMC is foreseen, which also directly contradicts the Constitution. These violations are deliberate, deliberate, they are a challenge to law and legislation. A crime against the constitutional order. And if this is not a sufficient argument, then let’s at least find an answer to the question of how to explain it to international institutions and potential investors.

Fact number 3. A lifetime commission is being created

Indeed, the competitive commission, which will select members of the NSSMC, is proposed to be elected indefinitely. No comments here.

Fact number 4. They speculate on agreements with the IMF

From March 24, 2023, Ukraine has obligations to the IMF until the end of May this year to adopt amendments to the law on the National Securities and Stock Market Commission “in order to strengthen the powers of the National Securities and Stock Market Commission, its independence and institutional capacity, as well as its mandate regarding cross-border and domestic cooperation.” We formally agreed to consider the powers of other regulatory bodies, to ensure compliance with the goals set out in the Memorandum, to move closer to the signing of a multilateral Memorandum of Understanding by the International Organization of Securities Commissions (IOSCO) by the end of December 2024, with full implementation of other provisions of the law by the end of December 2025.

The end of May is not far away. The law has not yet been adopted, and no one has really seen it. There are two options: either it will be adopted secretly, without examination and discussion, or they will not fulfill their obligations to the IMF.

If they adopt it, let’s highlight the following: the IMF has never indicated that, strengthening the regulatory body, the unconstitutional status of the NSSMC should be kept, obviously, they would not have inclined us to do so. If they don’t adopt it, let’s note that in fact, the IMF is already drawing the commission’s attention to the fact that the funds spent by donors on law-making work should have led to the adoption of the relevant legislation a long time ago, and the fund’s suspicions about inefficiency will definitely not decrease.

Fact number 5. Amounts of received international aid are being hidden

Everything is correct, the draft law is being created with the funds of International Technical Assistance. Obviously, 940 pages cannot be written for a salary. Meanwhile, the specific parameters of this assistance are hidden from society, as is the project itself.

The NSSMC refuses to furnish information on requests related to donor funds provided to it. The Cabinet of Ministers answered to the corresponding request that it does not know how much money from the International Technical Assistance was spent on the creation of the draft of the so-called Law on Commission.

To understand the scale of support, it’s vital to note that from 2022 to 2027, in general, assistance to Ukraine for reforming the financial sector will amount to 33 million dollars. Of course, not all of them go to the NSSMC, but considering that there are not so many reformers in the financial sector, they should definitely receive a decent share of donor money.

Fact number 6. Self-improvement

During the time, while the NSSMC is changing the legislation on itself, the following were created from scratch, launched, and adjusted: National Anti-Corruption Bureau of Ukraine, High Anti-Corruption Court of Ukraine, Specialized Anti-Corruption Prosecutor's Office, Economic Security Bureau of Ukraine was restarted, Commission for Regulation on Gambling and Lotteries was created and liquidated. It is characteristic that the listed bodies were NOT engaged in changing the legislation and creating or restarting themselves. The NSSMC is the only institution in the country that has been engaged in self-reform all this time. Most of the time, this ends up only empowering itself, but not improving efficiency. The new so-called Law on Commission is a yet another confirmation of this.

Fact number 7. They increase their salaries

If the so-called Law on Commission is adopted in the version for which the body itself is campaigning, then the salary, for example, of its chairman will amount to UAH 488,715:

• UAH 157 650 — the salary itself;
• UAH 157 650 — bonus for intensity of work;
• UAH 157 650 — incentive pay;
• UAH 15 765 — bonus for access to state secrets.

А найнижчого службовця — 94 590 грн:

• UAH 31 530 — the salary itself;
• UAH 31 530 — bonus for intensity of work;
• UAH 31 530 — incentive pay.

In general, such initiatives contradict Article 8 of the Law of Ukraine On Labor Compensation and Article 20 of the Law of Ukraine On the Cabinet of Ministers of Ukraine. But who in the commission cares? Obviously, the current problems of the state budget of Ukraine and the still unresolved issue of the return of allowances to the military remained out of its attention. I wonder what exactly the intensity of work in the commission is discussed, if the payment for it is commensurate with the risks of fighting at the frontline?

The infrastructure (legal, financial, informational, supervisory) created by the NSSMC in Ukraine "serves" the issuance and circulation of thousands of private securities, which are absolutely uninteresting to investors and, most importantly, does not generate attractive public instruments. Which issuers used the apparently extremely important right to carry out a public offering and what tools did they use? Over five years (2018–2023), nine issuers made 30 issues, including five issuers (a bank and four companies from the trade and finance spheres) that issued corporate bonds, three issuers (city councils of Kyiv, Lviv and Kharkiv ) that issued bonds of local loans, one issuer (Rivne People’s Club “VERES” PJSC) that issues shares. In fact, the circle of market participants really interested in public capital raising is limited to these issuers, i.e., control of the issuance and circulation of securities of nine issuers (!) is the real sphere of supervision of the NSSMC, taking into account international practice.

Who is the NSSMC framing?

First, all the signatories of the Memorandum with the IMF, from the President to the Minister of Finance. Why? Because, starting with the first editions of the memorandums, instead of fulfilling the commitments, it only imitates active law-making, which in no way affects the state of the entrusted market commission.

Separately, the NSSMC is framing the president, because in the event of the adoption of another new so-called Law on Commission, he will be forced to violate the Constitution every time when appointing members of this commission.

The NSSMC lets the country down when it reports to IOSCO, the IMF, and the EU on the fulfillment of obligations and the institutional capacity of the regulator body. Neither the former nor the latter is true.

The NSSMC is framing USAID donors, who allocate considerable funds for the reform of legislation within the framework of International Technical Assistance.

After all, the NSSMC is wasting the time allocated for the reform, because sooner or later the legislation will still need to be redone. In fact, that is why we still do not have a developed financial services market with effective tools, which literally prevents the country from developing and attracting investments, both foreign and domestic. When you will soon be told that 80 percent of the funds of the accumulative pension level will be invested in domestic government bonds (OVDPs), then before you get indignant at the alleged greed of the Ministry of Finance, ask yourself: where should they be invested in Ukraine? After all, in essence, the NSSMC is a regulatory body for the market that simply does not exist. Does it upset the regulatory body itself? No.

The goal of the new so-called Law on Commission is one – to keep the members of the NSSMC in their positions, and even with higher salaries, by hook or by crook.

Do we have time to continue these experiments? I don’t think so.

What is to be done? To begin with, create a new regulatory body for financial markets in Ukraine. To introduce a transitional period during which the composition of the NSSMC will be completely updated; the purpose of the transitional composition should be exclusively to exercise the powers to regulate the financial markets for this period. Legislation in the field of financial markets should be entrusted to a specially formed intergovernmental project group, involving specialized experts. It would not be superfluous to create a temporary investigative commission of the Verkhovna Rada, which would investigate both the International Technical Assistance funds spent by the commission and the overall efficiency of the commission’s work both from the point of view of reforming the sector and from the point of view of its regulation.

Read this article in russian and Ukrainian.