Monday, November 18, 2013
Sara K. Phillips and David C. Buxbaum have posted Capital Markets: Mongolia on SSRN with the following abstract:
2013 has been a period of both progress and setbacks for Mongolia’s burgeoning capital market. Highly anticipated amendments to the country’s Securities Market Law were passed and more significant legal developments may still be on the horizon. Currently, Mongolia’s capital market is limited, with only a small number of stocks and company and government bonds being traded regularly. However, as described in this article, the newly amended Securities Market Law heralds a new age for Mongolia’s capital market, paving the way for greater foreign investment within the country’s dominant mining industry and allowing for greater diversification of the economy. Mongolia’s newly amended Securities Market Law is a far cry from its predecessor. The Law incorporates a number of important financial instruments, including futures, options and derivatives. The Law’s amendments also promise to bring greater transparency to the market through the use of international disclosure requirements. Other important amendments will allow for multiple listings – which for Mongolian companies’ capital raising endeavours is of particular importance.
As in many emerging markets with vast natural resources, support for the mining industry is mixed. Mongolia’s government and its citizens support the country’s growth, but remain wary of greater foreign influence and perceived external control over Mongolia’s mineral resources. However, as seen in Mongolia’s past, the country demonstrates a consistent willingness to work alongside foreign investors, and Mongolia’s lawmakers continue to evidence an immense capacity for adaptation and development, with an eye towards the country’s undoubtedly promising future. The role of the London Stock Exchange in helping to shape the Mongolian capital market’s future cannot be understated. Cooperation with the Mongolian Stock Exchange began in 2011, when the London Stock Exchange Group agreed to administer management, training and oversight to the Mongolian Stock Exchange. In addition, the London Stock Exchange was to provide information technology services via its MilleniumIT platform, which would serve to bolster Mongolia’s ‘trading and surveillance infrastructure’. Regulations and procedures must still be implemented under the newly amended Law, and this sizeable task has been delegated to Mongolia’s Financial Regulatory Commission. However, with the London Stock Exchange’s continued support, it is hoped that the country will soon see a market with greater liquidity. Many in the country believe that the Mongolian Stock Exchange could even see listings worth US $45 billion in the coming decade. Thus, in spite of the country’s recent economic troubles, for many investors the future seems wide open in the Mongolian capital market.
This article provides a legal overview of Mongolia’s capital markets, including an analysis of the country’s capital market legal framework, a market overview, structural considerations, tax considerations, and other important legal developments. In the country’s ever-changing legal landscape, this article seeks to provide informative insight into the promises and challenges facing Mongolia today – a country with one of the fastest economic growth rates in the world.