Source of primary capital

Establisher of Broker - Dealer firms give statements on source of currency and non-currency resources, which import established wagers to the BD form- source of capital.

Domestic and foreign legal entities who are establishers of broker dealer firms are obligated to submit a form (form BD - legal entity establisher); which is available on the Comission Website) and:

1)      solutions to registration in the Register, in other words, decipherment of an abstract out of the Register for foreign legal entities and their owners;

2)      data on whether they have significant participation in some other legal entity based on the law which economic companies abide by (absolute and percentile sum of his ownership and date of establishment),

3)      other documentation required by the Commission.

Domestic or foreign entities, which are establishers of broker dealer firms, are obligated to give forms (form BD - physical entity establisher) which are available on the Comission Website and:

1)      a photocopy of identification cards for domestic physical entities, in other words a photocopy of passports for foreign physical entities;

2)      a business biography, which needs to contain data on their current operations, utilizations and professionalism;

3)      data on whether they have significant participation in some other legal entity based on the law which economic companies abide by(absolute and percentage rate of his ownership and establishment date),

4)      testemonial of competent upper management that they have not been criminally convicted, and that against him there is not an economic crime and no records of criminal investigations, in other words, an economic crime criminal investigation;

5)      other documentation required by the Commission.

With evidence that competent governement regulatory entities have approved the source of foreign entities participation in establishing broker-dealer firms in the Republic of Serbia, meaning adequate Acts of the regulatory body on authorized foregoing entities that can be broker-dealer firm establishers in the Republic of Serbia, in other words, statements from these entities that this kind of approval is not necessary.

Qualified participation

Qualified participation is regarded as participation in capital of broker-dealer firms based on what is reached or outreached 5%, 10%, 15%, 20%, 33% or 50% voters rights in assemblies of broker-dealer firms.

Request for giving pre-acceptance to obtaining qualified participation

The request for giving pre-acceptance in obtaining qualified participation is contained in the form (form BD qualified participation), which is available on the Comission Website:

Along with the establisher's request, legal entities who plan to obtain qualified participation need to also submit:

1)      a filled out questionaire on the form (BD questionaire for qualified participation) which is available on the Comission Website,

2)      documentation from Clause 8. Item 2, Rule book,

3)      an abstract of specific evidence from the shareholder, in other words, testimony from secondary becoming Register which contains a list of 10 establishers (shareholders in other words members), with the largest participation of capital,

4)      financial reports, with the testemonial of authorized auditors from the past three years,

5)      evidence of competent upper management taxes have been satisfied, not older than six months;

6)      a short summary of the entities business operations for the last three years,

7)      statement of total indebtedness of this entity with specifications and the sum of engagedment;

8)      the acceptance of The People's Bank of Serbia if the bank or insurance company obtains qualified participation;

9)      evidence of paid reimbursements to the Comission.

Along with the request, physical entity establishers who intend to obatain qualified participation need to also submit:

1)      a filled out questionaire on the form (form BD questionaire for qualified participation) which is available on the Comission Website,

2)      documentation from Clause 8. Item 3, Rulebook:

3)      a statement of property status and source of resources (immobility, significant participation from the capital of other legal entities based on regulations of law which economic companies abide by, currency deposits in banks with foregoing denominations and the central office of banks) with adequate evidence of ownership;

4)      evidence from competent directory upper management in regards to reconciliation of taxes, must be six months old or newer;

5)      statement on total indebtedment of this entity with specifications and the sum of engagedment;

6)      evidence of unjudged counts from Clause 137. Item 1. Index 1., in other words evidence that there isnt an ongoing investigation due to counts from Clause 137. Item 1. Index 2.

7)      evidence of paid reimbursements to the Comission.

Request for giving acceptance to voting on decisions by members of the board

Request for giving acceptance to voting on decisions by members of the board, in other words the director of the brokerage-dealer firm which is stated on the BD forms directorship out of Clause 4, Rulebook.

Along with the request, submitting of documentation out of Clause 138. Laws and:

1)      decision of competent board of directors with explanation and thoughts on business reputations,

2)      the questionaire (BD-member of the board) that is available on the Commision Website;

3)      evidence of unjudged counts from Clause 137. Item 1. Index 1., in other words evidence that there isnt an ongoing investigation due to counts from Clause 137. Item 1.Index 2.,

4)      statement of chosen entity that is not a member of the board of any other broker-dealer firm, authorized banks; companies controlling investments or self-paid pension funds; and along with these,

5)      evidence on business reputation-suggestions from legal entities where this entity has been or is still employed for the past three years (suggestions contain thoughts of professional and ethical qualities of these entities) or other suitable evidence,

6)      evidence of work experience on jobs in conjuctin with securities out of Clause 137. Item 3. Law-certificate of legal entities on type of business and period of operating these jobs and a copy of your employment records;

7)      evidence of paid reimbursements to the Comission.

The information system

The information system of the broker-dealer firm has to be organized in such a way that it truely protects and secures the system before gathering, entering, changing, transfering and also the use of data which pertains to the broker-dealer firm, in other words the technique in assuring itself to:

1)      entering in the database just the data which were chosen by way of confirmed Acts of the firm;

2)      in the database you must enter all data which entrance has been approved;

3)      it completes constant investigations on the precision of entered products

4)      broker-dealer firms manage specific evidence only on authorized entities, they have access to the database of data and the ability to enter, change and use data;

5)      every entity that has access to a workstation must have a username, password and the access to functions that are used only for the purpose of completing their specific scope of work. In addition, there is only one username and password per person.

6)      an abstract out of the database of data that carry date and time of creation and approval of an authorized entity;

In regards to the activity and scope of business which is operated, broker-dealer firms must proide a server and enough computer workstations which coincide with the number of employees. (brokers, portfolio managers and investment consultants) for business operation on the organized Security Market, settlement of obligaitons to security transactions, managing status of security accounts and other operations of the company.

Computer workstations must be trustworthy and protected from damage, they must have the capacity to support information for the largest number of clients and must be linked through a secure local network.

Requests for security and assurance

The broker-dealer firm is obligated to secure:

1)      continuity of the information system operation:

·   forming simultaneous duplicate data (mirror hard disk) on servers and in sercure back up servers (back up server);

·   backup power supply for electric energy of the information system which enables completion of an operation for all started operations;

2)      plans and usage for functioning the information and telecommunication system in case of unforeseen events, the need to protect hardware and software from an unauthorized admission of data and that of detailed surveillance.(procedure for registration, analization and control of every activity in the system), control admission through disbursement of authority and authorized users;

3)      protect the information system by resolutions on server down time, trustworthy systems for continuous power supply, reserve parts, connection and electric power supply to the network;

4)      the information system's trustworthiness in making secure copies of data (backup) in other words regulation of the system and procedure for making these type of copies, and the fact that saving this information and data is secured in another location;

5)      the plan to repair data in case of an electric outage, keeping in mind repairs may not take longer that 72 hours by regulated procedures and only by an adequate and capable employee;

6)      admittance control in offices and in the information system like: physical security, alarm, or video surveillance;

7)      adequate training for employees who use the system and the procedures that regulate its protection.

Client contract

The broker-dealer firm is required to lock-in a written contract with their client, which regulates their interconnection of rights and requirements in the functions of broker-dealer firms.

The contract confirms the maximum provision, in other words the reimbursement that the client pays for services that are included in the contract. In addition, in case of a change in fees versus a fee that was in effect at signing of the contract, you can enforce the existing fee.

The contract contains regulations that make up the contract's client statements

1)      before signing of the contract the client needs to be fully informed of regulations of business and informed of all its contents,

2)      the client needs to be informed with the rule-book on fees of the broker-dealer firms,

3)      his knowledge and experience before hand, in carrying on business with securities and other financial instruments on the financial market.

Client's statement is given through a form (BD client statement) which is available via the Comission Web Site.

Broker-dealer firms based on the client's statement of pre-knowledge and experience can put together a warning statement.

1)      in regards to the possible risks which can occur in trading of certain securities,

2)      if realization of accepted purchasing orders made obligations to announce offers of takeovers or loss of true vote by the regulations of Law on Company Takeovers.

Broker-dealer firms' statements are given through a form (BD warning statement) which is available via the Commission Web Site.

Order

An order contains:

1)      data on accepting an order (serial number, place, date, time (hour and minute) and the technique in accepting an order and number of contracts);

2)      client data

·   name, last name/client's company name;

·   address/central office and personal identification number,

·   the number of propriety accounts for the client identified by a symbol for members of the Central Register who manage this account or the number of collected custody securities (with the symbol identifying it as a custodian bank)

·   the number of bank accounts for the client (with the symbol, business bank - member of the Central Register who manages this);

3)      data on intentional transactions:

·   type of order (purchase or sell);

·   type of order depending on how the price was determined (market or limit stated price)

·   type of order versus time of order expiration (daily, until day and until cancelation with stated date of expiration)

·   CFI code and ISIN number of securities, nominal value

·   amount (number) of securities and price extended in currency;

4)      market data:

·   market organizer (company name and personal identification number)

·   trading method

5)      the sum of provision (broker-dealer firm, market organizer and the Central Register)

6)      symbol that the order enterer is known and that he is clear on all elements of the order especially the way to calculate reimbursements and costs which need to be paid for completion of an order;

7)      client signature and authorized entity of the broker-dealer firm.

Cancellation of an order contains:

1)      data on accepting an order which cancels a given order (serial number of order, place, date, time (hour and minute) and technique for admission of the order)/span>);

2)      client data

·   name, last name/client's companies name;

·   address/central office and personal identification number,

3)      data on order which is cancelling (order serial number, place, date, time (hour and minute)and technique for admission of the order)

4)      client's signature and authorized entity of the broker-dealer firm

Every executed change of an order based on price and amount of securities is completed by executing another order.

Techniques in accepting orders

An order may be in written form

-        directly,

-        via mail,

-        fax,

-        E via e-mail-a

-        or other electronic formats (through a secure internet server that has no ability to change an accepted document).

By way of exception an order can be given over the phone if there is the technical capacity to record the conversation, which secures accuracy and trust, which means cumulative fulfillment of these stipulations below:

1)      confirm the exact time of accepted order (date, hour and minute);

2)      identify the phone number from where the order was placed;

3)      exact identification of the client that ordered the order.

A recording of the telephone given order that the company is obligated to save in electronic format on applicable media files, which enable clear and precise reproduction. This reproduction has to be on file in the information system market organizer, at the least two years from the day of order admission.

At last the absence of the obligation to have an order certified in written form before entering it in the information system of the Stock Exchange.

Book of orders

A broker-dealer firm is required to manage a book of orders in chronological time order of accepted orders.

In the book of orders all accepted orders are entered here, changes, cancellation orders and data on realization of orders.

The book of orders is technically managed by:

1)      non-permittance of reimbursement changes of entered data.

2)      secures visibility and chronological order of entered data

3)      enables receival of abstracts (for a specific client, by type of contract, by type of security, by specific timeframe etc.).

The book of orders contain:

1)      data on all accepted data:

·   clients (with symbols to identify types of contracts)

·   board of directors and entities employed in the firm and entities in connection with the firm

·   firms and entities in connection with the firm,

2)      data on realization of accepted orders (rejected, realized in full, realized in part and unrealized)

All data entered in the book of orders are:

1)      name of the broker who entered the accepted order;

2)      date and number of closed contracts with a client and a symbol identifying scope of business

3)      type of security account

·   security owner account,

·   security owner account for broker-dealer firms and entities in connection with the firm,

·   security owner account for memebers of the board or entities employed in the broker-dealer firm and entities in connection with the firm,

·   client's controlled account;

4)      location for admission of orders:

·   directly at the broker-dealer office,

·   directly at the subsidiary

·   absent of the central office to offices of legal entities

·   through a legal entity authorized for accepting orders, but not for completion of orders;

5)      techniques in admission of orders:

·   in letter form (directly, via mail, fax or electronic means)

·   via telephone,

6)      type of order versus

·   type of transaction:

-    purchase order

-    sell order;

·   price

-    market order,

-    limit order (order with a limited price);

·   order timeframe

-    daily order,

-    order with expiration date (ssymbol identifying order's expiration date),

-    order valid until cancelled (an order without an expiration date);

7)      CFI code and ISIN number of securities,

8)      number (amount) of securities

9)      date and technique sufficiently accepting certificates (changes or cancelation)order;

10)  rejecting to accept, cancel or change an order (they are marked by given symbols):

·   reject admission (identify reason for rejection and the date when the client was briefed on rejection,

·   cancel (identify the day and hour when the order was cancelled),

·   change (identify the day and the time of change, in other words the serial number of the new order);

11)  completion of an order by date and time (day and hour) when an order is entered in the information system market organizer and name of the broker

12)  realization of an order: date and time (day, hour and minute), when the order was realized;

13)  type of realization order (closed transactions):

·   on organized exchange markets (market organizer and method of trading),

·   on organized non/exchange markets (market organizer and method of trading),

·   absent of organized market;

14)  the number of (amount) securities where the realized order identified by a symbol in full or in part

15) the price by which the order is realized.

Order coverage

Before entering an order in the information system market organizer, firms are required to investigate whether or not the securities account has enough securities which are an objective sale, in other words does the client have enough resources in his bank account to reconcile his obligations that would follow completion of order for purchase of securities.

This means that there is no more netting!

All in all, reading the legal provisions, you can come to a resolution that this was worked on too fast and because of this process there are many mistakes in the text. Managing the book of orders is also a very complicated process.

The worst of all is the exclusion of neting which has asterned securities trading and again left to the Central Register, in other words banks influence the time of settlement.