The investment adviser licence — through the change of regulator
In Georgia the supervision of the securities market and the licensing of its regulated participants is today within the competence of the National Bank of Georgia: under the Organic Law on the National Bank of Georgia, the National Bank is authorized to issue and revoke the licences of regulated participants of the securities market. Thus the licensing issues related to investment advisory activity open within the supervisory space of the National Bank. It must also be said plainly: the detailed licensing requirements for investment advisers are regulated by separate legislation, and the basis of this page is precisely the general contour of the National Bank's supervision.
The instruments of the National Bank's supervision
Within the supervision of the securities market the National Bank is authorized to: regulate the relations arising on the issuance and circulation of securities by issuers; issue and revoke the licences of regulated market participants; set them minimum capital requirements; approve the emission prospectus; conduct monitoring, inspection and investigation; verify the fulfillment of requirements defined by the international agreement on tax compliance; adopt, amend and repeal the rules related to market regulation and supervise their fulfillment; and also impose sanctions, including a fine — whose amount and procedure of imposition are determined by a normative act of the National Bank, the sum being directed to the state budget.
This list of supervisory powers creates a clear picture: for a market participant the relationship with the regulator is not episodic but a continuous process — from obtaining the licence to monitoring and from the fulfillment of mandatory rules to sanctions. In the case of a possible violation or a threat to investors' interests, the National Bank also retains the right to demand an explanation from any person. The minimum capital requirements ensure the financial reliability of the market participant; the approval of the emission prospectus controls the quality of information for investors; monitoring and investigation give the regulator a real picture of the processes on the market. In an internationally integrated market this also means that a question raised by a foreign regulator may find itself in a Georgian supervisory process: on the basis of a written request of a foreign body with similar functions, the National Bank may demand and receive explanations from any person.
The contour of banking supervision
The banking chapter of the same law shows that the National Bank's model of supervision is uniform across the financial sector: the supervision of a commercial bank, a microbank and a non-bank deposit institution includes the issuance and revocation of licences — including the conditional licence for a commercial bank — inspection and regulation, the issuance of written instructions, the establishment of additional requirements and restrictions, and the application of supervisory measures and sanctions. This model also transfers to the securities market: licence, monitoring, instructions, sanctions — the same instrument set from the same regulator. As the experience of banking supervision shows, the National Bank's supervisory style is preventive — written instructions, additional requirements and restrictions precede sanctions; understanding this style is an integral part of licence preparation.
What this means for an investment adviser candidate
First — the identity of the regulator: the authority responsible for licensing and supervision is the National Bank. Second — the hierarchy of requirements: the Organic Law sets the general framework of supervision, while the specific licence conditions — including minimum capital requirements — are detailed in the acts of the National Bank. Third — the model of liability: a violation of the rules reaches a fine, and the revocation of the licence is in the regulator's hands. The licensing of regulated participants of the securities market — including brokerage, depository and other activities — operates in a single supervisory space, of which investment advisory is a part; the regulator's approach here is functional: the more the person's activity concerns direct contact with investors, the higher the requirements and the more intensive the monitoring. Finally, the most important circumstance in discussing the investment adviser licence is the historical context: the competence for supervising the securities market is today in the hands of the National Bank, and this institutional change must be taken into account by market participants to the extent that the current acts of the National Bank are read as the source of licensing requirements.
The Instruments of Supervision — Article 52
Within the block of supervision of the securities market, the National Bank is authorized to regulate the relations arising when issuers issue and circulate securities, and to ensure the prevention, detection and suppression of violations.
By the same norm the National Bank issues and revokes the licences of regulated participants of the market, sets their minimum-capital requirements, approves the emission prospectus and conducts monitoring and inspection.
Frequently Asked Questions
Below we answer the questions most frequently raised about this field.
Who regulates the participants of the securities market?
The National Bank of Georgia — it issues and revokes the licences of regulated market participants and conducts their monitoring.
Where are the detailed requirements for investment advisers?
In separate legislation; the Organic Law sets the general framework of supervision, and the specific conditions are detailed in the National Bank's acts.
What sanctions does the National Bank have?
Sanctions including a fine; the amount and procedure are determined by normative act, the sum being directed to the state budget.
What does supervision in the banking sector include?
The issuance and revocation of licences, inspection, written instructions, additional requirements and restrictions, supervisory measures and sanctions.
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