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Ukraine prohibits pyramid schemes


The Verkhovna Rada of Ukraine approved a law that strengthens the National Securities and Exchange Commission (NSSMC) and prohibits the creation of financial pyramids. They are one of the main problems of the Ukrainian financial market.

The Supreme Council approved a law designed to strengthen the National Securities and Exchange Commission (NSSMC) and ensure its independence. The NSSMC notes that the existing regulations were ineffective and did not meet international standards. Moreover, they did not provide the regulator with mechanisms to prevent fraud on the financial market and the possibility of returning money to the affected Ukrainians.

Danyło Getmancew, chairman of the Tax Committee of the Verkhovna Rada, stated that the law was intended to stop the illegal activity of financial pyramids, of which there are nearly 100 in Ukraine. In addition, liability for violating the provisions of the law on capital markets will be established.

The new legal regulations relate, inter alia, to:

  • Increasing the institutional capacity of NSSMC as the national regulator of capital markets and organized commodity markets,
  • Introducing effective mechanisms to prevent manipulation,
  • Improving the applicable laws on international cooperation of NSSMC,
  • Building a supervisory system on capital markets and organized commodity markets that would be effective and compliant with the rules of the International Organization of Securities Commissions (IOSCO),
  • Introducing effective mechanisms to prevent manipulation, insider trading, illegal use of classified information, and other abuses on financial and commodity markets, notably banning pyramid schemes and preventing their formation.

There are many financial pyramids in Ukraine. NSSMC cites the Arkada Bank project and B2B Jewelry as an example of a financial pyramid. Financial pyramids are quite common in this country due to proper control over their activities. The introduction of the new legal framework enables the regulator to cooperate more widely with law enforcement authorities, freeze assets and money, access information and exchange it with foreign regulators.

Author: Izabela Kamionka

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