The securities market in Azerbaijan is overseen and regulated by the State Committee for Securities (SCS), which controls and supervises activities related to the issuance and circulation of securities in the country. The SCS plays a pivotal role in developing the country’s capital markets and protecting investors.


Formed in February 2016, the State Committee for Securities is the main regulatory body monitoring Azerbaijan’s securities markets. It oversees the issuance and trading of securities like stocks and bonds as well as activities of market intermediaries like brokerage firms and investment companies. The SCS aims to ensure fair and transparent securities markets to facilitate capital formation and economic growth.

As a regulatory agency, the SCS has wide-ranging powers including rule-making authority, conducting investigations, levying penalties, and license issuance. It supervises market entities like stock exchanges, brokers, depositaries, investment advisors, and more. The Committee also regulates public securities offerings like IPOs, monitors disclosures, and works to prevent fraud and manipulation. Overall, it strives to foster public trust and stability in the country’s developing capital markets.

History and Background

After gaining independence in 1991 following the collapse of the Soviet Union, Azerbaijan began transitioning to a market economy. The Baku Stock Exchange (BSE) was established in 2000 followed by the creation of a State Committee for Securities in 2003. This committee regulated securities markets during 2003-2015.

In February 2016, the SCS was re-established based on a presidential decree. This strengthened the country’s market oversight capabilities. The SCS structure includes departments for regulation and supervision, legal support, IT, administration and human resources. The Committee is led by its Chairman who oversees around 100 staff members.

The reformation of SCS also aimed to bring Azerbaijan’s regulatory framework in line with international standards and best practices. It has worked on implementing new rules and regulations aligned with EU legislation and global norms. SCS continues to enhance its oversight capabilities as the country’s capital markets evolve.

Responsibilities and Functions

The State Committee for Securities has extensive duties and powers related to Azerbaijan’s securities markets including:

  • Regulating issuances – Approving and registering prospectuses for public offerings of securities like IPOs while ensuring accuracy and completeness of information for investors.
  • Licensing firms – Registering, licensing and supervising market intermediaries like stock exchanges, brokers, dealers, investment advisors, depositaries and credit rating agencies.
  • Monitoring disclosures – Overseeing disclosures and periodic reporting by public companies relating to financials, ownership, operations and material events.
  • Setting rules – Developing regulations concerning securities issuance, trading, reporting, corporate governance and more based on legislative frameworks.
  • Inspections and enforcement – Conducting inspections of licensed entities and investigating violations and fraud with authority to levy fines and penalties.
  • Promoting transparency – Enhancing availability of market information, financial literacy and awareness among investors and public companies.
  • International cooperation – Collaborating with global bodies like IOSCO and ESMA to implement international best practices for securities regulation.
  • Advising on legislation – Providing recommendations to the President and Milli Majlis concerning drafting and amendments to securities laws.

The Committee uses this comprehensive set of powers to ensure orderly and equitable capital markets which facilitate transparent capital raising and provide investor protection.

Organizational Structure

The State Committee for Securities has a dedicated staff across departments that cover key regulatory functions:

  • Chairman – The Committee is headed by the Chairman, an appointed position, who oversees SCS strategy and operations.
  • Regulation and Supervision Department – Responsible for developing regulations, reviewing prospectuses, disclosures and overseeing markets and intermediaries.
  • Legal Support Department – Provides legal analysis and advice regarding regulatory matters and actions.
  • IT Department – Manages information systems and technological infrastructure for the regulator’s functioning.
  • Administration and HR Department – Handles administrative affairs including budgets, reporting and human resources.

The Committee also has an Advisory Board comprised of representatives from financial agencies, the stock exchange and issuers. Additional advisory councils and working groups are formed to address specific regulatory issues as needed.

Regulations and Reporting

SCS has introduced various regulations and reporting requirements aimed at enhancing transparency and governance. Key ones include:

  • Prospectus Rules – Details content and approval process for public offering prospectuses.
  • Listing Rules – Outlines requirements for listing securities on a stock exchange.
  • Disclosure Rules – Covers periodic and ongoing disclosures by public companies.
  • Takeover Rules – Specifies disclosures and procedures for acquisitions of substantial ownership in public firms.
  • Governance Rules – Sets out expectations regarding board composition, shareholder rights and treatment of minority investors for listed companies.
  • Reporting Forms – Standardized templates to submit disclosures and reports to the regulator.
  • Securities Market Rules – General provisions applicable to market entities and participants.

Strict disclosures and high quality information available in the public domain cultivates investor trust and facilitates more effective capital allocation.

Licensing and Supervision

The SCS has licensing, regulation and supervisory authority over various capital market entities:

Stock Exchanges

The Baku Stock Exchange (BSE) is the only stock exchange currently licensed and regulated by SCS. The regulator oversees the BSE’s rules, trading activities, product development, technological systems and risk management.

Brokers and Dealers

SCS issues operating licenses to securities brokers and dealers. It monitors their trading activities, capital adequacy, risk management and compliance procedures. Periodic reporting and on-site inspections are conducted.

Investment Firms

Investment companies providing portfolio management or investment advisory services require a SCS license. Their assets under management, fees, investment processes and personnel are supervised.

Depositories and Registrars

Securities depositories and registrars that respectively settle trades and maintain ownership records need SCS approval. Their safekeeping and record-keeping frameworks are overseen.

Other Entities

Other market entities like underwriters, credit rating agencies and securities printers also require regulator approval. Ongoing supervision as per regulatory guidelines occurs.

Rigorous licensing combined with monitoring of operations, procedures and compliance fosters high standards among capital market institutions.

Enforcement Mechanisms

To ensure compliance with securities laws and regulations, SCS utilizes the following enforcement mechanisms:

  • Inspections – Routine and for-cause inspections of licensed entities to check compliance.
  • Investigations – Probe of suspected legal violations based on referrals, surveillance or complaints.
  • Fines – Administrative fines up to AZN 50,000 against individuals and AZN 200,000 for legal entities.
  • Penalties – Other remedies include license suspension or revocation, bans from industry, voiding contracts and unwinding illegal transactions.
  • Referrals – Refer criminal violations to the Prosecutor General’s office for prosecution.
  • Alerts – Issue public alerts about suspicious activities to caution investors.
  • Cease-and-desist – Directing unregistered entities to stop unauthorized activities.
  • Litigation – Pursuing civil action through the courts for serious matters.

The regulator deploys this diverse toolkit as warranted to enforce legal provisions and deter misconduct. It also facilitates dispute resolution between investors and market participants.

Initiatives and Developments

SCS undertakes various initiatives to enhance regulatory oversight as well as expand capital market opportunities:

  • Implementing a state-of-the-art Market Surveillance System to detect suspicious trading activities including insider trading and market manipulation.
  • Launching an Investor Compensation Fund to compensate investors for losses due to broker insolvency.
  • Introducing a new Electronic Disclosure System for regulated entities to submit reports and disclosures digitally.
  • Developing the Central Securities Depository (CSD) to establish securities ownership records electronically replacing paper-based certificates.
  • Working on regulations to introduce new products like derivatives, repo transactions, municipal bonds, and asset-backed securities.
  • Creating a dedicated FinTech and Innovation Department to foster responsible adoption of financial technology.
  • Enhancing international cooperation through pacts with regulators in Russia, Turkey, Ukraine, China and others for information sharing and best practice exchanges.
  • Upgrading reporting rules and formats to incorporate the latest IFRS, ISIN, and XBRL standards.
  • Joining the IOSCO Multilateral Memorandum of Understanding (MMoU) for cross-border enforcement collaboration.

The SCS continues to evaluate further enhancements to keep pace with global best practices while supporting national economic objectives.

Looking Ahead

Overall, the State Committee for Securities has made significant strides in strengthening Azerbaijan’s regulatory framework since its re-establishment in 2016. As the markets continue to mature, priorities for the future include:

  • Supporting wider adoption of e-voting, e-disclosure and XBRL reporting by public companies
  • Expanding the investor base by increasing retail participation and attracting foreign investment
  • Broadening market monitoring and risk management systems including integration of artificial intelligence
  • Achieving full membership in IOSCO reflecting alignment with international standards
  • Fostering more public-private collaboration to boost capital formation and financial innovation
  • Developing educational programs and campaigns to promote financial literacy and investor awareness
  • Upgrading regulations in areas like cybersecurity, ESG disclosures and shareholder rights
  • Enhancing enforcement and supervision to deter fraud and misconduct in securities markets

With these efforts, SCS can foster robust capital markets that earn public trust, safeguard stability, and fuel national economic progress. The Committee’s oversight provides the bedrock for Azerbaijan’s aspiration to become a premier regional financial hub.


In less than a decade, the State Committee for Securities has made impressive strides in crafting a robust legal and regulatory framework for Azerbaijan’s capital markets. Its comprehensive oversight across disclosure, licensing, supervision and enforcement has cultivated more transparency and order.

SCS has firmly established itself as guardian of the public interest in the country’s securities sphere. Looking ahead, it remains committed to rigorous but balanced regulation that spurs financial innovation while ensuing financial stability and investor protection.

Backed by its broad powers and capabilities, the State Committee for Securities will remain pivotal in advancing Azerbaijan’s capital markets in the years to come. Its oversight provides the trust and stability for the nation’s financial system to power broad-based economic growth and prosperity.