CHAPTER I: GENERAL PROVISIONS

ARTICLE 1. PURPOSE AND SUBJECT OF THE CODE

The Code of Ethics establishes standards of ethical behavior for Members of the Joint Stock Company Georgian Stock Exchange (hereinafter referred to as "Members") and Brokers, employed by the Members, which they are required to comply with in their daily activities. The purpose of the Code is to ensure establishment of open and fairly regulated securities market and to promote its efficient functioning. The Code also envisages principals of professional behavior and fair conduct of business by the intermediaries in order to increase investors' trust in their fairness.

ARTICLE 2. COMPLIANCE WITH LEGISLATION ON SECURITIES

In addition to the norms established hereby, this Code obliges all Members and Brokers of the Joint Stock Company Georgian Stock Exchange (hereinafter referred to as "Exchange") to comply with the Legislation of Georgia on Securities Markets and all active laws of securities markets of other countries. Moreover, Members and Brokers of the Georgian Stock Exchange shall comply with the rules and norms of the National Securities Commission of Georgia (hereinafter referred to as "NSCG"), Exchange, and Central Depository, which they are a Member of.

ARTICLE 3. RESPONSIBILITY OF MANAGEMENT OF A MEMBER

Management of the Member Brokerage Companies is responsible to ensure that Company and Brokers, employed by this Company, comply with the requirements set by this Code.

ARTICLE 4. FAILURE TO COMPLY WITH REQUIREMENTS OF THE CODE OF ETHICS

It shall be duty of each Member and Broker to comply with all principals of the Code of Ethics of the Exchange. Failure to comply with any principals of this Code shall be considered as a breach of these standards and may result in a disciplinary fine in accordance with the Code of Procedures of the Exchange.

ARTICLE 5. DEFINITION OF TERMS

The terms used in this Code for the purposes of this Code have the following meanings:
5.1. Member - Owner-Member (Member-Shareholder) of the Georgian Stock Exchange.
5.2. Broker - A person employed by a Member that holds Broker License in accordance with the "Law of Georgia on Securities Markets." 
5.3. Conflict of Interests - A situation where the interests of a Member or a Broker conflict with duties to a Client, or when duty of a Member or a Broker to one Client conflicts with the interest of another Client.
5.4. Complaint - A written statement made by a Client, or a person acting on behalf of a Client, that describes complaint on a Member or any person employed by a Member regarding the intermediation in the securities transaction or other type of security transfer. 
5.5. Bona Fide Client - A Client, who has cash or securities in the possession of a Member and/or a contractual business relationship with a Member.
5.6. Representative of Market Regulator - An authorized representative of the NSCG or an authorized representative of any Self-Regulating Organization to which the Member belongs. 
5.7. Inside Information - Any non-public material information related to one or more Reporting Companies or their Publicly Held Securities.
5.8. Insider - Any person who, by virtue of the Membership in the managing body of a Reporting Company, or holdings in the capital of such Company, or because of his/her employment, profession, or duties, is in possession of inside information. Insiders shall likewise be considered other persons who have inside information originated from an Insider.  
5.9. Prohibition on Transfer of Inside Information - An action of an Insider or any person who deliberately receives inside information shall be considered unlawful if he/she:
5.9.1. Based on an inside information, in personal interests or on behalf of other person, purchases or sells securities of Reporting Company;  
5.9.2. Discloses such information to a third party unless it is defined by his/her professional duties;
5.9.3. Based on the inside information recommends purchase or sale of securities to a third party. 
5. 10. Market Manipulation - Activities described below:
5.10.1. In order to create false or misleading impression of active securities trading or false and misleading picture of securities market: 
a) executing securities transaction that does not change beneficial owner; or  
b) making series of bids or offers knowing in advance about counter bids/offers from the same or other parties.
5.10.2. Series of securities transactions, executed alone or together with other persons that:
a) will raise the price for the purpose of inducing purchase of the security; or
b) will decrease the price for the purpose of inducing sale of the security; 
c) intends to create misleading impression of active securities trading in  order to create or enhance artificially, volume of securities trading.  
5.10.3. Dissemination of information about possible rise or fall of the security's price or in order to cause such price rise or fall for this security. 
5.10.4. Statement of a Broker to induce purchase or sale of the security, at the time and under the circumstances when the stated information does not correspond with the real conditions and the Broker is aware of or has a ground to believe that he/she is wrong. 
5.10.5. To effect, either alone or in consent with others, a security purchase/sell transactions solely for the purpose of artificially fixing or stabilizing the price of such a security.
5.10. Material Fact or Event - Any fact or event that can be reasonably considered influential on the investor's decision to buy, sell, or hold a security.
5.11. Security (Securities) - Transferable financial instruments and rights that can be offered to public in the form of equity or debt securities, or can be converted into such securities, or the ones that carry the right to subscribe for or purchase such securities, investment contracts, and other instruments and rights related to securities. 

CHAPTER II: GENERAL PRINCIPALS OF ACTIVITIES AND CONDUCT OF MEMBERS AND BROKERS

ARTICLE 6. PRINCIPLES OF HIGH STANDARDS OF COMMERCIAL REPUTATION AND FAIRNESS AND OF FAIRNESS OF MUTUALLY PROFITABLE TRADE

All Members of the Exchange and Brokers employed by the Members, in the conduct of their business, shall pursue principals of high standards of commercial reputation and fairness and of fairness of mutually profitable principles of trade.

ARTICLE 7. RECOMMENDATIONS TO CLIENTS

7.1. When recommending purchase, sale or exchange of any security to a Client a Member shall strongly believe in the usefulness of the recommendation for the Client based on the facts disclosed by the Client. The information given in the sub-sections (a) and (b) of the second section of this Article, shall be obtained by the Member in writing, at the time of opening an account by a Client with the Member. 
7.2. Prior to recommending a transaction on security to a Client, a Member shall make reasonable efforts to obtain the following information:
a) Client's age and income;
b) Client's family and other financial responsibilities;
c) Client's financial status;
d) Client's tax status;
e) Client's investment objectives;
f)  Client's risk tolerance; and
g) other similar information that can be used by a Member or a Broker when making recommendations to a Client.
7.3. If a Client refuses to provide a Member with above-mentioned information, the Member shall note on the Client's new account form that the Client refused to provide such information and the Member shall confirm it with the signature. 

ARTICLE 8. PRACTICES THAT ARE CONSIDERED AS DISCIPLINARY VIOLATIONS

8.1. All Members and Brokers employed by a Members are obliged to deal fairly with their Clients. Following are examples of practices that shall be considered illegal and will result in disciplinary fine:
8.1.1. Offering speculative, low-priced securities to a Client when not having information about Client's requests and objectives or without actually trying to find out such information; 
8.1.2. Excessive trading of securities with no regard for the Client's financial status or investment objectives on such Client's account that generates commissions; 
8.1.3. Opening of fictitious account to execute those transactions that would have been prohibited if executed on other account;
8.1.4. Execution of prohibited transactions on Client's account; 
8.1.5. Using false or misleading advertising materials in order to create wrong impression or to force the wrong decision on a Client.
8.1.6. Making false or misleading statement regarding Client's account status or regarding the value of the securities on the account;
8.1.7. Forging Client's signature or seal on any document.

ARTICLE 9. FAIR PRICES, COMMISSIONS AND COMPENSATION

9.1. Compensation of the Member for the services performed shall be appropriate and fair. Compensation shall extend to all Client's with equal financial status.
9.2. If a Member buys or sells security personally or for a Client the Member shall execute transaction at a fair price for a Client, taking into consideration all relevant circumstances.
9.3. If a Member, in some transactions, acts as Client's agent a Member shall not set more than a fair commission or service compensation for the Client, taking into account all relevant circumstances.  
9.4. Members must comply with all regulations issued by the NSCG related to service commissions and charges.

ARTICLE 10. EXECUTION OF RETAIL TRANSACTIONS

Members and their Brokers shall use reasonable diligence to ascertain the best market for the security and buy or sell security at a favorable price for the Client under prevailing market conditions.

ARTICLE 11. FORWARDING OF PROXY AND OTHER MATERIALS

A Member shall forward a proxy and other related materials, received from the issuer according to the set regulation, to each beneficial owner of shares that are held by the Member as a Nominee Holder.

ARTICLE 12. PUBLICATION OF TRANSACTIONS AND QUOTATIONS

No Member shall publish or circulate, or cause to be published or circulated, any statement or notice unless a Member is sure that the transaction has been executed in accordance with an active legislation. No Member shall publish or circulate, or cause to be published or circulated, a Quotation on a Security unless a Member is sure that the Quotation represents an actual bid or offer on the Security.

ARTICLE 13. OFFERS AT STATED PRICES

No Member shall make an offer to buy from or sell any security to any person at a stated price unless the Member is ready to purchase or sell at that price and under conditions stated at the time of publishing an offer to buy or sell.

ARTICLE 14. FIDUCIARY DUTY

A Member acting as a settlement intermediary, transfer agent, fiduciary or other and possessing information regarding the ownership of securities, shall not use this information to create, increase, or decrease purchases, sales, or exchanges of securities except when approved by the beneficial owner of the security.

ARTICLE 15. INFLUENCING OR REWARDING EMPLOYEES OF OTHER MEMBERS

No Member or Broker shall give or permit giving of any valuables in the form of gratuity (including monetary gratuity) exceeding value of 100 GEL, to any Broker or employee of another Company, if such payment or gratuity is related to the business of the Member.
 

ARTICLE 16. CONFIRMATION OF TRANSACTIONS

After execution of every transaction with a Client, a Member shall provide or send out to the Client a written notification with complete information bellow:
a) unit price of a security; 
b) exact date and time of transaction; 
c) total number of securities bought or sold; 
d) transaction commission amount; 
e) total volume of the transaction including transaction commission;
f) whether or not a Member acted as a Client's agent or as a dealer;
g) whether or not a Member acted as a double agent for buyer and seller; and
h) any other information related to the transaction that might be required to be disclosed by the NSCG.

ARTICLE 17. DISCLOSURE OF A RELATIONSHIP WITH AN ISSUER

A Member, who is in any way financially dependent on or has a relationship with an issuer of security, shall disclose an existence of such relationship to Clients at the time of signing a contract or at the time of receiving an order regarding the issuer's security.

ARTICLE 18. DISCRETIONARY ACCOUNT

18.1. No Member or Broker shall exercise Broker rights on Client's account unless the Client has given prior written authorization to the Member and if an account has not been accepted by the Member. A manager or a director, appointed by the Member, must certify Discretionary Account in writing.  The person authorized to certify an account could not be a Broker who is executing transaction on this Account. 
18.2. A Member or an authorized person appointed by a Member shall approve in writing every order entered in each Discretionary Account. Such person shall review all discretionary accounts at least once a month in order to detect and prevent transactions, which are excessive in volume and frequency according to financial resources and character of the account. 
18.3. A Member, upon signing a written agreement with a Client shall inform the Client about those provisions of these rules that are regulating Member relationships with Clients.

ARTICLE 19. CLIENT FUNDS AND SECURITIES

19.1. No Member or Broker shall make improper use of Client's funds or securities.
19.2. No Member shall borrow or lend securities that are kept for the Client and which can not be pledged or loaned, unless a Member has obtained a prior written authorization permitting lending of such securities from the Client.
19.3. No Member shall hold Client's securities, which are fully paid for and are kept for any Client, unless such securities are segregated and clearly identified by the method that distinctly indicates the Client's ownership on these securities.  
19.4. No Member or Broker shall guarantee a Client that any security account of the Client maintained by the Member, or any securities transaction executed by the Member for the Client or together with Client, is protected against the loss.
19.5. No Member or Broker shall have direct or indirect share in the profits or losses in any account maintained by the Member.    

ARTICLE 20. CLIENT ACCOUNT STATEMENTS

20.1. Each Member shall send to a Client a monthly account statement of any security position, cash balance or account activity volume over the period of time since the last statement was sent. If no change has occurred on the account then account statement is sent on a quarterly basis.
20.2. An "account activity volume" shall include purchases, sales, credit interests or debit, charges or credits, dividend payments, transfer activities, securities receipts or deliveries, and journal entries related to securities or cash fund transactions under the Member nominal ownership or control.
20.3. The Exchange, acting through the Trading Surveillance and Disciplinary Department, may discharge any Member from the obligations specified by this Article based on a reasonable written request. Any Member who has valid clearing agreement, as described in Article 21 of this Code, is discharged from the obligations specified by this Article under reasonable grounds. 

ARTICLE 21. CLEARING AGREEMENTS

21.1. All clearing agreements entered by a Member shall clearly specify the agreement rights and responsibilities of every participant to the agreement. It shall also, at minimum, define each participant's responsibility to the matters described bellow:
a)  opening, confirming, and monitoring of Client's accounts;
b)  extension of credit;
c)  maintenance of books and records;   
  d)  receipt and delivery of funds and securities;
e)  safeguarding of funds and securities;
f)  maintenance and transmission of confirmations and periodic reporting;
g)  receipt of orders and execution of transactions.
21.2. Each Client whose account envisages conditions of full disclosure at the time of opening an account shall be notified in writing about existence of clearing agreement.

ARTICLE 22. SUPERVISION

22.1. Each Member shall establish and maintain Broker activities' supervisory system that will be intelligently planed and organized in accordance with the Law on Securities Market, regulations of the NSCG and the Exchange. Final responsibility for proper supervision shall rest with the Member.
22.2. Each Member shall create, maintain, and enforce intelligently planned written supervisory procedures to oversee managing body and employee activities. 
22.3. Member's written supervisory procedures shall include supervisory system mentioned above, job titles of the employees, license/certification status and business address. It shall also state the responsibilities of each supervisory person that relates to the type of business activities a Member. A Member shall enter in the internal record the names of all persons who are designated as supervisory personnel and the dates when such designations become effective. A Member shall keep such records for a period of at least three years, the first two years - in the office.
22.4. A copy of the Member's written supervisory procedures shall be kept and maintained everywhere where the Member conducts his/her supervisory activities. Each Member, in a particular time frame, shall amend its written supervisory procedures in accordance with amendments to the Law on Securities Markets, amendments to the regulations of the NSCG, and in case of changes in the supervisory system and employee staff. Each Member is obliged to communicate such amendments throughout the organization.
22.5. Each Member, for the internal records, shall establish written procedures for all transactions and correspondence executed by the Broker, that are related to the securities transactions and intermediation that shall be reviewed and approved by a Director.

ARTICLE 23. BOOKKEEPING AND RECORDS

23.1. Each Member shall maintain accounting books, records, memoranda, and other documentation in accordance with the Law of Georgia on Securities Markets, relevant regulations of the NSCG, and the rules of the Exchange.
23.2. Each Member, at the time of opening an account, shall draw an agreement with the Client and preserve it in conformity with the rules of the NSCG.
23.3. Each Member shall keep Client's all written complaints and records of actions taken in response to complaint.

ARTICLE 24. STATEMENT OF FINANCIAL CONDITION

A Member, upon request by any potential Client, shall make available information related to the Member's financial condition as disclosed in the most recent balance prepared in accordance with the Member's business practice and/or the Law of Georgia on Securities Markets, regulations of the NSCG, and the Exchange.

ARTICLE 25. DEALING WITH NON-MEMBERS

25.1. No Member shall sell or buy any security from any non-Member Brokerage Company unless transaction is executed at the same price the Member would exercise with the Client, who is not engaged in investment banking or securities business.       
25.2. The provisions of Article 25.1. do not apply to foreign Brokerage Companies who are not eligible for Membership on the Exchange. However, in any transaction with such foreign Brokerage Company where a trading concession, discount, or other price concessions are allowed, a Member, from a foreign Brokerage Company, shall obtain an agreement that, when making sales of the securities acquired in such transaction in Georgia the foreign Brokerage Company shall conform to the provisions of Article 25.1. as would a Member of the Exchange.
25.3. The term "Non-Member Brokerage Company" includes all Brokerage Companies that are so licensed by the NSCG but are not Members of the Exchange.
25.4. The regulations of this Article shall not be interpreted and used in such a way that they limit the right of a Member of the Exchange to execute dealer discount, price concession, commissions or other special conditions. 

ARTICLE 26. TRANSACTIONS WITH BROKERS

26.1. No Broker of the Member has a right to open or maintain a securities account with another Member without prior written authorization by the Employer Company.
26.2. A copy of the authorization described in Article 26.1. shall be provided beforehand to the Member with whom the Broker intends to open personal account or execute transaction.
26.3. If a Broker, with prior written authorization from his employer, opens personal account with another Member, the executing Member shall transmit to the employer duplicate copies of all transaction confirmations and monthly account statements of the Broker.           

ARTICLE 27. CONFIDENTIAL INFORMATION

27.1. Every Member shall create, maintain and enforce internal rules related to the maintenance and safekeeping of confidential information. These rules shall envisage the following:
27.1.1. What is considered to be confidential information by the Member:
a) information related to the Member's activities;
b) information relating Clients.
27.1.2. Member's requirements to the Brokers to comply with these rules. Such rules obligate a Broker not to disclose confidential information to:
a) other departments of the Member or their Brokers;
b) Brokers of other Members, Clients, market regulators or public.       

ARTICLE 28. DISCLOSURE OF CONFIDENTIAL INFORMATION

28.1. Confidential information may be disclosed to:
a) representatives of market regulating body upon  Members' request;
b) authorized person of a Client with written authorization.
28.2. Failure to comply with the rules regarding confidential information or their violation shall be constituted as a breach of this Code and shall result in disciplinary fine.