Draft Law No 5065 On Financial Services and Financial Companies. Basic provisions and key novelties. Need to adopt the law.

On February 15, 2021, the Verkhovna Rada of Ukraine registered draft law No 5065 On Financial Services and Financial Companies (hereinafter referred to as Draft Law No 5065).

The need to adopt Draft Law # 5065 is preconditioned by a rapid development of relations on the market of financial services and ‘outdated’ current legal regulation (now the legal relations are governed by the Law of Ukraine on Financial Services and State Regulation of Financial Services Market adopted 20 years ago, with only insignificant changes being made thereto).

Draft Law No 5065 is intended to enshrine new approaches to the regulation of the markets of financial services, activities of financial companies and pawnshops. In particular, provisions of Draft Law No 5065 are to entrench principles of providing financial services and protection of clients’ rights in order to create transparent and competitive market environment; to establish principles and methods of state regulation of the activities in providing financial services and their respective restrictions; to determine the list of  financial services that a financial company and pawnshop may provide, with combination of such services being likely; to enshrine the possibility for financial companies to carry out other commercial activities apart from providing financial services; to determine the licensing procedure for financial companies and pawnshops, as well as the procedure and grounds for changing the scope of a license of a financial company or pawnshop (increase or decrease in the number of types of financial services that an entity has the right to provide).

Also, novelties of Draft Law No 5065 are definitions enshrined in law such as a financial company and a pawnshop; introduction of the notion of secrecy of a financial service as the analogy of bank secrecy; introduction of the outsourcing as performance by third parties of functions or some processes of a financial service provider, and the change of the approach to licensing with a view to simplifying the process of entry to the market and enhancing the efficiency of the regulation.