Capital markets play an increasing role in the development of Georgia’s financial system by facilitating capital formation, investment opportunities, and market transparency. The principal legal framework governing this sector is the Law of Georgia on Securities Market (the “Law on Securities Market”), originally adopted on 24 December 1998 and subsequently amended, most recently in December 2023.
The Law establishes the regulatory structure for the issuance, trading, and supervision of securities in Georgia. Its objectives include ensuring market integrity, protecting investors, and promoting fair and competitive trading practices.
Regulatory Authority
The primary supervisory body responsible for the regulation of the securities market is the National Bank of Georgia (the “NBG”). The NBG exercises extensive regulatory and supervisory powers over market participants and securities market infrastructure.
These powers include:
- Licensing and supervision of securities market participants;
- Adoption of secondary regulations governing market conduct;
- Monitoring compliance with securities legislation;
- Imposition of sanctions and enforcement measures where violations occur.
The NBG is also authorized to establish criteria relating to the suitability and qualifications of governing body members of licensed entities. In addition, the regulator may determine, through subordinate legal acts, certain activities that shall not be regarded as insider trading.
Legal Framework and Market Structure
The Law on Securities Market governs the issuance, public offering, and trading of securities in Georgia and establishes the institutional framework necessary for the operation of capital markets. It regulates relationships between issuers, investors, intermediaries, and market infrastructure institutions.
The legislation aims to ensure:
- transparency of securities transactions;
- protection of investor rights;
- reliability of market infrastructure; and
- fair competition among market participants.
Brokerage Companies
Brokerage companies constitute one of the principal categories of licensed securities market intermediaries. Such entities must obtain a license from the NBG to conduct activities related to the circulation of securities.
Permitted brokerage activities include transactions involving:
- shares;
- bonds;
- capital interests;
- certificates;
- promissory notes; and
- cheques.
Brokerage companies may also provide investment advice and intermediary services to investors. In performing these activities, brokers are required to execute client orders under the best available market conditions and must not act contrary to the interests of their clients.
In addition to securities regulation requirements, brokerage companies are subject to anti-money laundering and counter-terrorism financing obligations consistent with international standards. These obligations include identifying clients, understanding the nature of their business activities, and monitoring transactions conducted within the scope of the business relationship.
Brokerage companies must also comply with international tax transparency obligations, including requirements arising from intergovernmental agreements implementing the Foreign Account Tax Compliance Act (FATCA).
Stock Exchanges
A stock exchange is a licensed entity responsible for organizing trading in securities. The establishment and operation of a stock exchange requires authorization from the National Bank of Georgia.
Applicants for a license must demonstrate compliance with statutory and regulatory requirements, including the integrity and suitability of governing body members and significant shareholders. Individuals convicted of serious financial crimes, money laundering, or terrorism-related offences are generally prohibited from holding such positions.
Stock exchange trading rules regulate matters such as:
- trading procedures and order execution;
- dispute resolution mechanisms;
- suspension or termination of trading in specific securities;
- trading session schedules; and
- rights and obligations of market participants.
Moreover, the reorganization or liquidation of a stock exchange is permitted only in accordance with applicable law and regulatory oversight.
Securities Registrars and Nominal Holders
The maintenance of securities ownership records is performed by securities registrars and nominal holders. Registrars are responsible for maintaining official records of securities holders, while nominal holders may hold securities on behalf of beneficial owners.
This structure facilitates the efficient transfer and administration of securities while preserving transparency regarding beneficial ownership where required by law.
Like other market intermediaries, registrars are subject to anti-money laundering requirements and must implement appropriate internal compliance systems under the supervision of their governing bodies.
Licensing and Regulatory Requirements
Licensing requirements for securities market participants share several common elements. Applicants must demonstrate:
- adequate financial resources, including minimum capital where applicable;
- appropriate qualifications and experience of governing body members; and
- compliance with suitability criteria established by the National Bank.
Licenses may be granted, suspended, or revoked depending on compliance with regulatory obligations. The NBG retains authority to impose supervisory measures or sanctions where violations of securities legislation occur.
Market Integrity and Insider Trading
Ensuring market integrity constitutes a central objective of Georgian securities regulation. The Law therefore, establishes rules governing insider information and insider trading.
Insider information is defined as precise information that has not been publicly disclosed and which directly or indirectly relates to one or more securities or their issuers. The use or disclosure of such information in securities trading is prohibited where it could distort market fairness.
The National Bank may further clarify the scope of prohibited conduct through regulatory acts specifying actions that do not constitute insider trading.
Investor Protection
Investor protection represents a fundamental principle underlying securities market regulation in Georgia. Licensed market participants must act in the interests of their clients and provide accurate and transparent information regarding securities transactions and associated risks.
Customer due diligence requirements, including client identification and transaction monitoring, contribute both to financial integrity and to investor protection by promoting transparency within the financial system.
International Compliance
Georgia’s securities regulatory framework reflects international regulatory standards. In particular, legislation incorporates requirements relating to anti-money laundering and international tax transparency.
Market participants must determine clients’ tax residency status and collect relevant information in accordance with agreements between Georgia and the United States concerning international tax compliance. Such information may be provided to relevant tax authorities within the framework of those agreements.
The Law on Securities Market establishes a comprehensive regulatory regime governing the issuance, trading, and supervision of securities in Georgia. Through the oversight of the National Bank of Georgia, the framework emphasizes transparency, market integrity, and investor protection.