ASEAN+3 Bond Market Guide 2018

Cambodia

• Publisher: Asian Development Bank
• Year: 2018
• ISBN:
  9789292610678
• Topic: Business
• Subtopic: Bonds
• Index: Business

ASEAN+3 Bond Market Guide is a comprehensive explanation of the region's bond markets. It provides information such as the history, legal and regulatory framework, specific characteristics of the market, trading and transaction (including settlement systems), and other relevant information. The Bond Market Guide 2018 for Cambodia is an outcome of the support and contributions of ASEAN+3 Bond Market Forum members and experts, particularly from Cambodia.

II. Legal and Regulatory Framework

A. Legal Tradition

Cambodia’s legal system follows the civil law tradition.

Many of the relevant laws and regulations for the securities market have been put in place since the late 1990s and continue to be revised and adjusted to the requirements of modern financial and capital markets.

B. English Translation

Cambodia does not have an official requirement to translate legislation into English. Instead, the respective regulatory authorities often take it upon themselves to provide an unofficial English version of applicable laws and regulations to the market at large. This may lead to differences in interpretation of the original Khmer version. At the same time, translations undertaken by the SECC are generally referenced as consistent in the use and definition of English technical terms for the securities industry.

While the English translation of Cambodian laws and regulations find frequent use, they may only be used for reference since the final interpretation—and the acceptance and application by Cambodian courts—is based on the original Khmer version.

C. Legislative Structure

Like many ASEAN+3 economies, Cambodia features a multitiered legislative and regulatory system, both overall and for the securities market in particular, guided by the Constitution of the Kingdom of Cambodia.

The tiered approach is detailed below using the designated Khmer terms and the example of existing securities market-related legislation and regulations.

[1st tier] Constitution of the Kingdom of Cambodia

[2nd tier] Kram (laws or decrees) represent both fundamental and key legislation

[3rd tier] Anukret (sub-decrees) are intended to detail laws and decrees for a particular area of legislation such as for securities market-related implementation rules and regulations

[4th tier] Prakas (official declarations) represent further detailed implementation rules under the respective Anukret

[5th tier] Guidelines from regulatory authorities

Table 2.1 applies the prevalent legislation and regulations to the individual tiers of the legislative structure for the securities market mentioned above.

Table 2.1: Examples of Securities Market Legislation by Legislative Tier

Legislative Tier	Content or Significant Examples
Constitution of the Kingdom of Cambodia	Principles, Rights, and Obligations
Fundamental legislation: Kram (laws or decrees) and Key legislation for the securities market	• Law on State-Owned Enterprises,1996 • Law on the Organization and Conduct of the National Bank of Cambodia, 1997 • Law on Banking and Financial Institutions, 1999 • Law on Commercial Enterprises, 2005 • Law on the Issuance and Trading of Non-Government Securities, 2007 • Law on Government Securities, 2007
Implementation rules and regulations: Anukret (sub-decrees)	• Anukret on the Conduct and Organization of the Securities and Exchange Commission of Cambodia, 2008 • Anukret on the Implementation of the Law on the Issuance and Trading of Non-Government Securities, 2009 • Anukret on Tax Incentives in the Securities Sector, 2015
Prakas (official declarations)	• Prakas on the Licensing of Securities Firms and Securities Representatives, 2009 • Prakas on the Issuance of Tradable Securities by the NBC, 2010 • Prakas on Code of Conduct of Securities Firms and Securities Representatives, 2011 • Prakas on Qualified Investors in the Securities Sector, 2016 • Prakas on Operating Rules on Securities Liquidity Provider, 2016 • Prakas on the Implementation of the Operating Rules of Securities Market, 2017 • Prakas on Accreditation of Professional Accounting Firm Providing Professional Services in the Securities Sector, 2017 • Prakas on Public Offering of Debt Securities, 2017 • Prakas on Accreditation of Credit Rating Agency, 2017 • Prakas on Accreditation of Bondholders Representative, 2017
Guidelines	• Guidelines on Granting Investor Identification Number, 2012 • Guidelines on Application Forms to Open a Trading Account and Customer Agreements for Derivatives Trading, 2016

NBC = National Bank of Cambodia.

Source: Compiled by ADB consultants for SF1 and based on publicly available information.

1. Legislation: Kram (laws or decrees)

Fundamental legislation consists of basic laws or decrees that may govern the issuance of specific instruments and the basic roles and responsibilities of financial and securities market participants. These laws and decrees are reviewed and updated through the full legislative process, requiring tabling by the Prime Minister in (and adoption by) the National Assembly, approval by the Senate, and promulgation by the King before taking effect.

Key legislation is the summary term or important additional term for those laws or decrees aimed at a certain market or specific activities, such as the bond market or the securities market at large.

Fundamental Legislation

The Law on Commercial Enterprises, 2005 represents the foundation for the issuance of securities—both equity and debt—in Cambodia. However, the law does not contain a universal definition of securities. In addition, Cambodia also features the Law on State-Owned Enterprises, 1996, which specifies the actions and responsibilities of state-owned enterprises across all market activities, including the issuance of securities.

At the same time, the Law on Banking and Financial Institutions, 1999 defined a number of original activities for banks and financial institutions relating to the securities market when such a market was still to be established.

Together, these laws have formed the basic legal framework for securities issuance and many market participants for some time.

a. Law on Commercial Enterprises, 2005

The Law on Commercial Enterprises, 2005 replaced the governance of activities within and among companies that had previously been done purely on a contractual basis. The law defines and prescribes roles and responsibilities, as well as actions for commercial enterprises, including private partnerships and limited public companies.

The law states the ability and criteria for commercial enterprises to issue securities, but this law does not provide details on the procedures to issue securities.

For those companies making a public offering of securities, the relevant activities fall under the Law on Trading and Issuance of Non-Government Securities, 2007, which is reviewed later in this section.

b. Law on State-Owned Enterprises, 1996

The Law on State-Owned Enterprises, 1996 states the types, roles, and responsibilities of state-owned enterprises, including their possible activities as permitted entities in the securities market. State-owned enterprises are likely to eventually participate in the securities market, as both issuers and investors, once the bond market commences operation.

Key Legislation

Key legislation for the bond market and the securities market at large in Cambodia consists of two specific laws, one with a focus on government securities and the other on nongovernment securities.

a. Government Securities—Law on Government Securities, 2007

The principal basis for the issuance of government securities is the Law on Government Securities, 2007. However, this law has not yet been fully implemented since the issuance of government securities is only targeted to begin in 2019. In order to implement this law effectively, the Ministry of Economy and Finance (MEF) is drafting an Anukret (sub-decree) on government securities issuance.

In addition, the actual issuance of government securities for each fiscal year may in future be regulated by the Financial Management Law for the respective fiscal year.

b. Nongovernment Securities—Law on the Issuance and Trading of Non-Government Securities, 2007

The Law on the Issuance and Trading of Non-Government Securities, 2007 remains the key piece of legislation for the securities market in Cambodia. The law provided for the establishment of the SECC and provided for the role and functions of a securities exchange, securities clearing and settlement operator, and securities depository operator. It also gave the SECC authority to license securities firms and identify the basic roles and responsibilities of other specific market participants.

2. Anukret (Implementation Rules and Regulations)

In the Cambodian legislative context, an Anukret (used both in singular and plural form) further defines and details the corresponding laws and decrees with a focus on a particular area, in this context the bond and securities markets or market segments, its institutions, and participants. An Anukret is adopted by the Council of Ministers and signed by the Prime Minister.

Three existing Anukret deserve specific mention for the purpose of the bond market and the securities market at large.

a. Anukret on the Implementation of the Law on the Issuance and Trading of Non-Government Securities, 2009

This Anukret supports the implementation of the Law on the Issuance and Trading of Non-Government Securities, 2007. The procedures and criteria for the issuance of publicly issued securities of commercial enterprises are stated in this Anukret. In addition, the Anukret also regulates operators, including the securities market operator, clearing and settlement facility operator, and securities depository operator, all of which must comply with specific criteria to gain approval from the SECC, as well as the functions and obligations of each operator. Financial intermediaries—such as securities fir...