A New Framework for the Capital Market: What the Draft Law on the Prudential Supervision of Investment Firms Brings

In the context of the European integration process, the capital market of the Republic of Moldova is also undergoing structural changes to its regulatoryframework, aimed at alignment with the EU acquis. The initiation of the draft Law on the Prudential Supervision of Investment Firms marks a paradigm shift from a minimalist compliance regime to a modern, risk-based framework aligned with European Union standards.

The draft law was developed by the National Commission for Financial Markets and is being promoted by the Ministry of Finance, in line with the commitments assumed by the Republic of Moldova in the EU accession process, including the transposition of Directive (EU) 2019/2034 on the prudential supervision of investment firms (IFD).

The current framework,primarily governed by Law No. 171/2012 on the capital market, was designed for a small market with limited activity and low levels of risk. In practice, the prudential regime has focused almost exclusively on minimum capital requirements, and general rules on internal organization.

Official data point to a small-scale capital market with a limited number of investment firms, most ofwhich are credit institutions. In this context, the current, relatively simplified supervisory framework is not designed to support the development of more diversified activities or more sophisticated investment services. From the perspective of the Republic of Moldova’s European integration, maintaining this model may entail risks of non-compliance with EU standards, competitive distortions, and an insufficient level of investor protection.

Key provisions of the draft law

The new draft introduces a differentiated prudential regime tailored to the actual activities carried out by investment firms and shifts the focus from formal compliance to effective risk management.

Differentiated increases in initial capital requirements, depending on the services provided:

a. a minimum of EUR 75,00 for firms providing investments services without holding clients' funds or financial instruments;

b. EUR 150,00 for other non-bank investment firms;

c. up to EUR 750,000 for firms engaged in proprietary trading, underwriting of financial instruments, or the operation of trading systems.

To avoid market disruptions, compliance will be implemented gradually, up to the signing of the EU accession treaty.

The draft law introduces a comprehensive prudential framework, requiring firms to implement internal processes for assessing capital adequacy and risks (including operational,custody, and liquidity risks), as well as enhanced reporting and transparency obligations.

It also extends the powers of the supervisory authority,which will be able to assess not only financial indicators but also qualitative elements such as corporate governance, management structures, internal policies, and risk control mechanisms.

The draft establishes clear supervisory and sanctioning mechanisms,including minimum thresholds for sanctions, publication of applied measures,and individualized enforcement rules, in line with EU law principles on proportionality and deterrence.

Explicit rules are introduced regarding remuneration policies,aimed at aligning financial incentives with the firm’s risk profile and ensuring compliance with the principle of equal pay for women and men for equalwork or work of equal value.

The law also provides for consolidated supervision of groups of investment firms, including financial holding companies and mixed structures, with clear requirements regarding the reputation, competence, and accountability of members of management bodies.

In the short term, the draft law will require non-bank investment firms to reassess their business models. Some firms will need to raise additional capital, while others may need to narrow their scope of activities or specialize. In the medium and long term, however, the impact could be structurally positive, by increasing the financial resilience of intermediaries, strengthening investor protection, and creating real preconditions for capital market development.

Although the draft law goes beyond a purely technical transposition of the EU acquis, it must be assessed in light of the realities of a very small capital market with alimited number of investment firms. The new prudential requirements will not automatically lead to market expansion, but they can contribute to its consolidation by increasing predictability, discipline, and investor confidence.