l these should lead to regular shareholder meetings and increase the role of the supervisory boards in giving the strategic direction to companies.
Another important factor for improving the corporate governance practice in Georgia is to have an active market for corporate control. Namely, there is a need:
To put in place an adequate legislation for investor protection. More specifically, to introduce the investment compensation schemes, strengthen the bankruptcy system and adopt the rules for takeovers;
To adopt the legislation regulating the financial intermediaries (such as private pension funds and mutual funds), which at present are absent in Georgia.
Properly functioning financial intermediaries would act as large domestic institutional investors and ensure that large volumes of capital resources are directed to the market. This, in turn, would facilitate the competition in the financial market and lead to an active market for corporate control.
The measures needed to ensure the fairness of the market include:
To Enforce a trading transparency;
To deter an unfair trading.
The last two objectives can be reached by means of ensuring an effective functioning of the National Securities Commission of Georgia (NSCG), which should be capable of ensuring an effective enforcement of the securities regulations. More specifically:
The NSCG should have an adequate Inspection, Investigation and Enforcement power, including the criminal prosecution authority;
The Government of Georgia (GoG) should increase the budgetary support of the NSCG to ensure a proper functioning of the agency;
The NSCG should be more accountable to GoG for its activities regarding the regulation of Georgian capital market;
The NSCG should develop a program to supervise the activities of Self-Regulatory Organizations (SROs); and
The NSCG has to develop a code of ethics for its staff.
Another measure needed to ensure the fairness of the market is:
To enforce adequately the rights of the shareholders, which should be done through the improved court system.
In order to improve Georgian court system, it is important to conduct training of judges in the topics concerning the corporate law and operation of the securities market
All the above-described measures are designed to achieve in future a sound and liquid capital market in Georgia.
Specific recommendations for improving the performance of GSE. More specific recommendations, together with the objectives to be achieved, performance indicators, responsible agencies, duration, etc., are presented in the next pa...
