13 Jan 2022

New Capital Market Act in Serbia

The end of 2021 was marked by changes in the legislation of the Republic of Serbia, which included the adoption of a new Capital Market Act (“Act”) that entered into force on January 5 this year. The objective of the Act is to introduce greater transparency and responsibility in business, the introduction and development of financial instruments offered on the Serbian capital market, creating a more attractive environment for both domestic and foreign investors. It was adopted following the government’s Capital Market Development Strategy 2021-2026, and the Action Plan for its implementation.

The law will start to apply after one year, from January 6, 2023, to allow all stakeholders to get familiarized with its provisions.

It regulates in detail existing instruments to align them with global markets but also brings significant innovations. According to the Securities and Exchange Commission, the Act is harmonized with the EU regulations governing the markets of financial instruments (MiFid II), the prospectus, investor compensation, transparency, securities settlement systems, and market abuse. The law regulates in detail the initial public offering and secondary trading in financial instruments, the regulated market of the Republic of Serbia, the provision of investment services and the performance of investment activities. It particularly focuses on transparency as a fundamental principle in the field of finance and regulates the clearing, settlement and registration of transactions in financial instruments and financial organizations.

In addition, the Act prescribes the broader powers of the Securities and Exchange Commission. The Securities and Exchange Commission is obliged to adopt further regulation for the implementation of the Act within six months from the day it entered into force.

Furthermore, the Deposit Insurance Agency, the Central Securities Depository, and the Belgrade Stock Exchange are obliged to harmonize their operations with the provisions of the Act within nine months from the date it entered into force. Brokers, dealers and other financial institutions that have been granted a license by the Securities and Exchange Commission are obliged to harmonize their operations with the Act within one year from the day of its entry into force.

The Act meets the needs of contemporary equity markets and its participants and lays the foundations for the development of capital markets in the Republic of Serbia,  taking into account the relatively passive status that the Belgrade Stock Exchange has had so far. One of its key objectives was to harmonize with relevant regulations of the European Union, which should benefit foreign investors and contribute to the attractiveness of Belgrade Stock Exchange, especially in light of the recent approval for the acquisition of 10.24 percent of its shares by Athens Stock Exchange group, the largest stock exchange in South-Eastern Europe.

The Act is expected to contribute to much-needed progress in the development of the capital market in the Republic of Serbia, while all institutions and participants must quickly adapt to the new rules.