Iran's Securities and Exchange Organization (SEO) says it will strive to reform market regulations and procedures to address discrepancies and improve transparency to help attract investors to the sluggish market in the next Iranian year that begins on March 21.
SEO head, Majid Eshqi, on Monday elaborated on the organization's performance in the outgoing year and took questions from the press.
According to Eshqi, the plan to reform the stock market law has been finalized by the Mjlis Economic Commission. “Meetings have been held over the year with financial institutions to explore and share ideas. The bill will go to the chamber early next year,” SENA quoted him as saying.
The official noted that amendments to the Trade Law have also been proposed to enhance capital inflow and distribute profit to small investors. He did not elaborate.
Back in June, the Majlis Research Center (MRC), the parliament’s think tank, released the draft of a bill to reform the capital market law and called on experts to comment. The bill calls for amending some laws and adding 16 articles.
One proposal obliges all listed companies and those affiliated to the government, non-government public institutions, and pension funds to sell all their products via commodity exchanges, such as the Iran Mercantile Exchange and the Iran Energy Exchange.
Goods can be traded through futures contracts, and to improve the derivatives market the regulator will grant tax benefits to companies operating in the two markets.
Similarly, the Ministry of Oil will be required to sell feedstock fuel to refineries and petrochemical plants through the IME and IRENEX.
The Central Securities Depository of Iran is obliged to pay shareholder dividend through a centralized platform. Dividend must be paid within three months after the annual general assembly of companies and penalties are envisioned for managers found in breach.
The SEO for long has been trying to create a legal framework obliging listed companies to pay dividends to shareholder accounts.
Long demanded by retail investors, the decision is expected to help them receive dividend without hassles.
Listed companies deposit dividend per share (DPS) to accounts in designated banks, asking shareholders to go to bank branches to receive the DPS within set timelines. In many cases, investors forsake the DPS to avoid going to the bank.
Public Opinion
The SEO will be mandated with developing mechanisms for receiving public views on violation of laws and wrongdoings in the capital market and reward whistleblowers.
To help protect investor rights, the SEO would be required to prepare clear guidelines to identify victims of capital market crime and adopt appropriate measures to compensate losses.
The proposals list routine activities of the capital market and ask the regulator to move them online within six months after the bill becomes law to cut the bloated bureaucracy and expedite procedures through online platforms.
Tax Breaks
Tax holidays to the tune of 10% have been considered for listed companies. This incentive should help double listed companies that hold at least 20% of their stake in free floating stocks.
Floating stock represents the total number of outstanding shares that are open to public for investment. The number reflects public interest or investor interest to invest in a company.
High-float stocks are better known for the stable movement that is seen in their price. This stability helps reduce risk and create long-term gain.
Under the new rules, government-controlled listed companies will be allowed to set up project funds at the national level. As the name suggests, the funds are designed to pool financial resources for financing government projects.
Proposals further stipulate that the government be allowed only in-kind contribution and not in cash. In-kind contribution includes providing machinery, giving permits and the like. Project funds should acquire financial resources via share subscriptions in the capital market.
Furthermore, the government cannot hold more than 20% of shares in a project fund and is obliged to divest at least 25% of its shares in “major national projects” within six months of the new laws.
Proposed reforms call on the Ministry of Science and the Ministry of Education to improve “economic and financial literacy” of the masses by adding the relevant subjects and courses in school curriculums.
