GSE Procedures

CHAPTER I: GOAL AND PURPOSE OF THE CODE

ARTICLE 1
GOAL
1.1. The Code of Procedures of JSC Georgian Stock Exchange (hereinafter referred to as "Exchange") regulates disciplinary violations and their examining procedures related to the Members of the Exchange and Brokers.
1.2. Brokers have the same rights as Members and will be subject to the same duties and obligations under this Code.

ARTICLE 2
DEFINITIONS
2.1. Commission - Exchange Supervisory Board Ethics Commission, which is authorized, by the Supervisory Board, to review disciplinary violations and take actions in accordance with this Code and the rules of the Commission approved by the Board.
2.2. Committee - Exchange Hearing Committee, which consists of three Members, two of which are elected from the list of Judicatures of the Hearing Committee and the third one is elected from the list of Members of the Commission. The Committee meets to review particular disciplinary issues. The Committee does not have any permanent Members and is dismissed after resolving an issue. Committee acts according to this Code.
2.3. Judicatures of the Hearing Committee - twelve judicatures elected by the General Meeting of Depositary Partners two of which are appointed to the Hearing Committee.
2.4. NSCG - National Securities Commission of Georgia.
2.5. Claimant - for the purposes of this Code, means the Exchange when presenting a claim.
2.6. Respondent - discipline-violating Member of the Exchange, Brokerage Company or a Broker.
2.7. Complainant - Head of any Office of the Exchange, affected client, Broker or Member Brokerage Company of the Exchange, which sends a complaint to the General Director of the Exchange according to the Article 4.1. of this Code.

ARTICLE 3
INTERPRETATION
The rules of the Code of Procedures shall not be defined in such a way that it limits the rules of the Exchange.

ARTICLE 4
EXAMINATION OF POTENTIAL VIOLATIONS
4.1. Head of any office of the Exchange, affected client or any Member may file a Complaint against a Member or a Broker. The Complaint must be in writing and must specify in details the facts that relate to violation. The Complaint shall be sent to the General Director of the Exchange.
4.2. The General Director shall within his/her authority and with consideration to the sphere of the subject matter dismiss the Claim or immediately forward it to the Trading Supervisory and Disciplinary Office of the Exchange for investigation and for preparation of a preliminary written report. This report shall be completed within ten (10) business days from the receipt of the Claim. The General Director, after reviewing the report may:
a) dismiss the claim;
b) request further investigation by the Trading Supervisory and Disciplinary Office; or
c) forward the report on investigation findings to the Commission for the examination.
4.3. If the General Director dismisses the claim and decides to close the matter, he/she shall promptly forward preliminary written report, prepared by the Trading Supervisory and Disciplinary Office, along with his/her written opinion to the Commission for examination.

ARTICLE 5
CONFIDENTIALITY
5.1. All documents related to claims, investigations, and disciplinary actions are considered to be non-public information. Therefore, Commission, Committee, and Supervisory Board shall not disclose such document or information from this document and shall not transfer them to any person other than those involved in the process of disciplinary review.

ARTICLE 6
INVESTIGATION PROCESS
6.1. Upon receipt of the investigation report the Commission, within two days, shall be convened to review the matter and by majority vote, may:
a) dismiss the claim;
b) request continuation investigation by the Trading Supervisory and Disciplinary Office;
c) recommend the Trading Supervisory and Disciplinary Office, together Respondent and the Broker, to form Minor Rule Violation Letter as specified in Article XVII of this code;
d) present the claim to the Respondent.
6.2. If the Commission decides that the Claim lacks the grounds a letter noting this decision shall be sent to the Complainant.
6.3. During the course of investigation by the Trading Supervisory and Disciplinary Office, each Member and Broker shall fully cooperate with the Exchange and promptly present all requested information, as it is required by the Trading Supervisory and Disciplinary Office investigation. Failure to do so may result in a temporary suspension of authority of a Member or a Broker.

ARTICLE 7
CONFLICT OF INTERESTS
7.1 No Member of the Commission, Committee, Supervisory Board or General Meeting has a right to participate in disciplinary matter if:
(a) a Member, Member Company, any Broker of the Member Company, or any of his/her relative (as specified by the fourth Article of Article XXIX of the Tax Code) is one of the parties to the case;
(b) a Member has a personal interest in the subject matter;
(c) a Member has a financial interest in the matter or some gain; or
(d) a Member participation in the subject matter can be considered as a conflict of interests.

CHAPTER II: DISCIPLINARY CLAIMS, HEARINGS AND DECISIONS

ARTICLE 8
SUBMISSION OF CLAIMS BY THE COMMISSION
8.1. If on the basis of investigation and review of the matter by the Trading Supervisory and Disciplinary Office the Commission concludes that a Member or a Broker has violated the Exchange rules or Legislation of Georgia on Securities, the Commission shall submit a claim in accordance with Article 9 of this Chapter.
8.2. If commission decides that violation is of administrative or criminal code type, or is beyond competency of the Commission, then it shall immediately send notification to the NSCG. However, if the violation requires court or the Arbitrage decision the Commission advises the Complainant to take the claim to court or Arbitrage.

ARTICLE 9
FORM, CONTENT, NOTICE AND WITHDRAWAL OF THE CLAIM
9.1. All claims shall be in writing, in a form approved by the Supervisory Board, and shall specify in detail the nature of Claim and rules, legislation or provisions of Charter, which are considered to be violated. If Complaint specifies few disciplinary violations then each violation shall be formed into a separate Claim. All Claims must be signed by the Chairman of the Commission.
9.2. A copy of the Claim shall be hand delivered to the Respondent's representative or shall be mailed to the Respondent's address by certified mail. In the case of a Broker, a copy of the Claim shall also be mailed to the Member of the Exchange where the Broker is employed.
9.3. Once a Claim has been presented by the Commission, it may withdraw the Claim before the Committee decision at any time. Withdrawal of a Claim does not preclude the Commission from issuing the same Claim in the future.

ARTICLE 10
RESPONSE TO CLAIMS
10.1. All responses to Claims shall be in writing in a form approved by the Supervisory Board and shall be forwarded to the Commission within ten (10) calendar days from the day the Claim has been sent to the Respondent. The Commission has a right to extend this period, if there is sufficient ground. . Such extension shall be requested by the Respondent with motivated application. In such case, Commission is authorized to give Respondent five (5) additional calendar days.
10.2. If a Claim has been amended, the time period for filing a response or amended response will be extended for ten (10) calendar days from the date an amendment was sent to a Respondent. If response has already been filed, a Respondent will have ten (10) calendar days, from the day an amendment is sent, for filing an amended response.
10.3. If the Commission does not receive any response from the Responded, then it shall send a Second Notice according to which, the Respondent is obliged to respond within five (5) calendar days from the day the notification is received. The Second Notice shall state that the Respondent's failure to reply within the period specified in the Notice shall be considered by the Commission as an admission by the Respondent of the allegations in the Claim.
10.4. If the Respondent does not respond to the Second Notice within the time period specified, the Commission shall, upon its own initiative, order a Hearing on the matter. At the Hearing, the Hearing Committee shall consider the allegations of the Claim to be admitted by the Respondent.
10.5. In the Claims involving multiple Respondents, copies of the responses submitted by each Respondent shall be sent to all other Respondents.

ARTICLE 11
REQUEST FOR HEARING
11.1. In the response a Respondent may request a Hearing by the Commission. In this case, a Hearing by the Commission shall be set for the next business day. After such hearing or in the absence of such a request, the Commission orders the Claim to be set for Hearing by the Committee.
11.2. A notice stating the date, time and place of the Hearing shall be mailed to the Claimant and the Respondent at least ten calendar days prior to Hearing, however, extraordinary circumstances may require a shorter notification period. Extraordinary circumstances include acceleration of the process in order to protect and safeguard customer funds and securities.
11.3. Upon consideration of the length of expected testimony, the volume and complexity of documentary evidence as well as other factors considered material by the Commission, Commission may determine to take a Claim for an Extended Hearing. Notice for the Extended Hearing will be served as described in Article 11.2.

ARTICLE 12
BURDEN OF PROOF
12.1. The Exchange, and its staff shall have the burden to prove that "according to the presented evidence it is rather likely that Respondent has committed the alleged violation than not." If the Exchange and its staff meet the burden, then the Respondent shall have the opportunity to present all available factual and legal defenses, give explanations and other legitimate activities. Illegitimately gathered evidence shall be considered judicially and factually void.

ARTICLE 13
HEARING COMMITTEE
13.1. From the list of Judicatures of the Hearing Committee, approved by the General Meeting of the Exchange, the Secretary of the Hearing Committee shall appoint two persons, to serve in the Hearing Committee. The Secretary, when appointing Members of the Hearing Committee, shall take into account the facts surrounding the case, Committee Members' experience in the business areas alleged in the Claim and the absence of any potential conflict of interests. The third person to serve on the Hearing Committee shall be a Member of the Commission, appointed by the Chairman of the Commission. The Chairman may also serve as a Hearing Committee Member. The Committee Members shall, among themselves, choose a Chairman of the Hearing Committee. The Committee Members shall be appointed within three days period.
13.2. In the event of an Extended Hearing, the Secretary will appoint two persons to the Extended Hearing Committee, using the same criteria as described in Article 13.1. The third Member of the Hearing Committee may be selected by the Chairman of the Commission or the Chairman himself/herself can be the one. Members who serve on the Extended Hearing Committee shall be compensated for the work in the Committee.

ARTICLE 14
EVIDENCE. HEARING COMMITTEE PROCEDURE
14.1. The Chairman of the Committee, at least five (5) business days prior to the hearing, as specified in the notice send to the Respondent under Article 11.2 of this code, shall present the Respondent and Respondent's counsel with any documentary evidence and names of witnesses provided by the Claimant. On the other side, Respondent shall present to the Chairman of the Committee with any evidence and names of witnesses that deny this Claim.
14.2. During the Hearing:
a) The Respondent is allowed to attend the Hearing with an attorney;
b) The Complainant is obliged and the Respondent has a right to give explanations regarding the disciplinary violations and present all additional evidence, considered by the Committee relevant and necessary, discovered during the Hearing;
c) Both parties shall have the opportunity to cross examine the other party's witnesses;
d) The Hearing records shall be kept by the Secretary of the Hearing.

ARTICLE 15
DECISION OF THE HEARING COMMITTEE
15.1. At the conclusion of the Hearing, the Hearing Committee shall decide, by a majority vote, whether or not the Respondents violated any rules as charged. If the Committee determines that the violation has occurred, it will issue a written decision, which sets forth:
a) the act that the Respondent has been a part of;
b) the rule, legislation , or provision of a Charter according to which, such act is a violation;
c) the basis upon which the conclusions are made;
d) the sanctions imposed, the reasons supporting the sanctions, and time frame for their execution.
15.2. The written Decision of the Committee shall be signed by all three Members of the Hearing Committee and shall be hand delivered to the Respondent's representative or mailed to the Respondent's legal address. A copy of the Decision shall be sent to the Member of the Exchange with whom the Respondent is employed.
15.3. The sanctions contained in the Decision shall be executed by the General Director of the Exchange within three (3) business days from the date the Decision is made. Exceptions are the sanctions, which are in the competency of the Supervisory Board or the General Meeting and which shall be imposed at the decision of the Supervisory Board or the General Meeting on the earliest meeting.
15.4. If the Committee decides that presented evidence shows no violation it may, in writing, dismiss the Claim. A copy of the Committee's decision to dismiss the Claim shall be promptly sent to the Respondent and the Member whose Broker is the Respondent.

ARTICLE 16.
RIGHT OF APPEAL
16.1. The Respondent or the Claimant has a right to appeal the Hearing Committee's Decision to the Supervisory Board of the Exchange within ten (10) calendar days from the day the Decision has been made.
16.2. The Supervisory Board shall, within ten (10) business days of receiving Respondent's Complaint, review the Committee's Decision, along with the written records, evidence and documents produced as a result of Hearing.
16.3. The Supervisory Board, by majority vote, may:
a) dismiss the Hearing Committee decision, in whole or in part;
b) dismiss Decision sanctions;
c) confirm the Committee Decision, in whole or in part; or,
d) under extraordinary circumstances, recommend that the matter be reviewed by a new Committee, elected under the procedures described in Article 13.1.
16.4. The Supervisory Board shall, within three (3) business days from the day the decision is made, mail to the Respondent a written conclusion and for the cases described in sub-Articles "a", "b", and "c" of Article 16.3 give appropriate instructions to the General Director of the Exchange.
16.5. Once the time period for an Appeal is up and/or the Supervisory Board has confirmed the Decision of the Hearing Committee, the Exchange shall send a copy of the Decision to the National Securities Commission of Georgia, if a gross violation of law took place, as it is required by Article 41.10 of the Law on Securities Markets.

ARTICLE 17.
MINOR RULE VIOLATION PROCEDURE
17.1. Notwithstanding Articles 8 and 9 of Chapter II of this Code, the Commission, in accordance with the requirements set forth below, may impose a fine on the party at fault (not to exceed the GEL 500) and/or a censure on any Member or Broker for violating any Exchange rule.
17.2. If the Commission decides that the violation has occurred, the Commission may recommend to the violating Member or Broker to submit a Minor Rule Violation Letter (hereinafter referred to as Letter) specifying in detail the nature of the violation, the violated rule, provision of the Exchange Charter or Inner Regulation. The Letter shall also include consent of the Respondent for imposition of a sanctions specified by this Code.
17.3. The Letter shall be presented to the Commission for its review. If the Commission rejects the Letter, the Commission may take appropriate disciplinary actions related to the violations. The Letter shall be entered into the Claims Register of the Exchange in accordance with Article 20 of this Code.
17.4. If the Commission has to bring a Claim against a Member or a Broker as specified by Article 9 of this Code, the Minor Rule Violation Letter shall not have any influence on the further review of the case.

ARTICLE 18.
SETTLEMENT PROCEDURE
18.1. A Respondent, at any time prior to the Decision of the Committee, may propose in writing a settlement of the Claim to the Commission.
18.2. Offers to Settle shall be made in conformity with the provisions of this Article so that, they should not be made frivolously or propose a sanction inconsistent with the violations.
18.3. Offer to settle shall be made in writing and shall contain in detail:
a) the act a Respondent has been or is suspected to be a part of;
b) the Exchange Charter or Inner Regulation Provision, Agreement conditions or rules that were allegedly violated with such action;
c) a statement that the Respondent consents to findings and violations claimed against him/her;
d) a sanction to be imposed on the Respondent;
e) a waiver of all rights to appeal to the Supervisory Board of the Exchange and the Courts of Georgia (if the right to review the violation is not beyond the competency of the Exchange), or to challenge the validity of the order made by the Ethics Commission, if the offer to settle is accepted by this Commission.
18.4. If an Offer to Settle is accepted by the Commission, it shall issue an Order to Settle. This Order shall note violated rule, provision of legislation or a Charter and shall impose sanctions consistent with the terms of the Offer to Settle. If a Gross Violation took place than a copy of the Order shall be sent to the National Securities Commission of Georgia as required by Article 41.10 of the Law on Securities Markets, in compliance with the decision of the Commission.
18.5. An Order of the Commission to Settle a Claim shall have the same legal force as the Commission's decision and proceedings shall be concluded as of the date the Order is issued. The sanctions are imposed in accordance with Article 15.3 of this Code.
18.6. If the Offer to Settle is rejected by the Commission, the Offer shall be considered void.
18.7. Where there is more than one Respondent in a proceeding and one or more of the Respondents submit an Offer to Settle, the Offer may be accepted or rejected to all or some Respondents. The proceeding will thereafter be terminated as to those Respondents whose Offers to Settle have been accepted, but their participation as witnesses may be required at any Hearing. Thereafter, the Commission will proceed with regular disciplinary procedures, provided by this Code, to those Respondents who did not submit Offers to Settle.
18.8. If an Offer to Settle is not accepted and it becomes necessary for the Commission to follow the regular disciplinary procedures against the Respondent, the Offer to Settle will not be used against Respondent and will not be considered in the future proceedings.

ARTICLE 19.
CLAIMS REGISTER
19.1. The Commission shall promptly notify Trading Surveillance and Disciplinary Department about all Claims, which shall be recorded in the Claims Register by this Department. The Commission, shall also promptly notify the Department about the changes in the status of every Claim filed, including Responses of the Respondent, Respondent's rejection for the Hearing, Letter of the Minor Rule Violation, Offers to Settle, and Decisions of the Committee. All such notifications shall be entered in the Claims Register of the Exchange.

ARTICLE 20.
SANCTIONS
20.1. In relation to disciplinary violations, the Committee, in accordance with Article 15 of this Code, and the Commission, in accordance with Articles 17 and 18, may impose one or the combination of the following sanctions:
a) a censure;
b) a monetary fine;
c) a suspension of some or all of the rights of an Exchange Member or a Broker;
d) a limitation of activity;
e) re-certification;
f) compensation of one or few parties ;
g) expulsion from the Membership of the Exchange.

ARTICLE 21.
COMMITTEE HEARING COSTS
21.1 In any disciplinary action, a Member or a Broker may be required to cover Hearing Costs, as the Committee deems fair and appropriate.