Development of Capital Market in Moldova: Recommendations for Regulatory Reform
Key Points
The development of the capital market in Moldova requires regulatory reform to enhance transparency, liberal regulation policies, and investors’ trust. The following key points highlight the need for such reforms:
Taxation Policy Reforms
- The taxation policy of capital market participants should be reformed to stimulate institutional investors and not simply increase state revenue.
- Projects of normative acts on taxation policy and tax collection processes should be publicly consulted and approved by market participants (investors and issuers).
Legislation Changes
- Moldova’s legislation needs to change, e.g., similar to Romanian practice, with provisions related to taxing profits obtained on the capital market and introducing tax grills based on securities holding periods and acquisition/sale prices.
Goals of State Regulation
The goal is to create an efficient capital market as a foundation for accelerated economic growth through correct regulation frameworks (tax regime and attraction mechanisms of capital resources). The potential of state regulation should focus on:
- Reducing trading costs for active institutional investors
- Ensuring financial and investment activities that generate efficient revenues
- Increasing participants’ confidence
- Generating positive externalities
- Efficiency in authorization procedures
- Increasing information disclosure requirements
Current Regulatory Practices in Moldova
Current regulatory practices in Moldova are considered dogmatic, with:
- Asymmetric regulation of the domestic capital market (some segments excessively supervised and regulated)
- Interdictions and conditionings applied through price controls on securities markets
- Distorted role given to the Moldova Stock Exchange (MSE) for certain operations
- Lack of advanced trading technologies
Conclusions
The legal and institutional framework is crucial for the development of the securities market. Therefore, it’s essential for the regulation body to implement best practices that ease market participants’ activity without affecting economic security. Recent global crises have taught lessons on creating a favorable legal infrastructure to attract foreign capital and develop the capital market.
Bibliography
The document provides references to Moldovan laws and regulations related to the capital market, including:
- Law on the Capital Market (No. 171 of July 1, 2012)
- Law on Securities Markets (No. 199-XIV of November 18, 1998)
- Strategy for Developing the Non-Banking Financial Market (2011-2014)
- Annual Report of the National Commission for Financial Market Regulation and Supervision (CNPF) for 2014