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. Last Updated: 07/27/2016

New Rules to Rein In Securities Markets

The Finance Ministry has handed over to the government new regulations designed to rein in Russia's fledgling securities markets in the wake of troubles at the MMM investment company, a ministry official said Wednesday.


"We have given the regulations to the government, which intends make a decision on it within the next 10 days," said Bella Zlatkis, head of the department of public securities and financial markets.


The draft regulations include a measure that would prevent companies from buying their own shares, closing a loophole exploited by many investment companies to manipulate the price of their securities, Zlatkis told reporters.


The measure would pose a problem for companies like MMM and Telemarket, which attract investors by promising to repurchase their own shares at profitable prices quoted in advance. Zlatkis said that Telemarket had already agreed to stop quoting its own share prices and to provide authorities with a list of its shareholders.


The new regulations come one month after the government, reacting to an investor panic sparked by MMM's inability to repay shareholders, set up a special commission headed by acting Finance Minister Sergei Dubinin to form a legal basis for the securities market.


The value of MMM's shares subsequently collapsed from 125,000 rubles to 1,000 rubles, leaving millions of investors holding nearly worthless pieces of paper. After a three-week closure, however, the company this week began selling and buying "tickets," notes that entitle the holder to one-hundredth of an MMM share.


Although Zlatkis reiterated the Finance Ministry's position that the tickets are not securities, she said that the company should be able to continue its activities as long as it abides by the law, and even suggested granting MMM a banking licence.


She said that the draft regulations were only a stop-gap measure until proper legislation can be considered by the State Duma, which reconvenes this autumn. A bill on the regulation of securities is due to receive its first reading Oct. 3, Zlatkis said.


If approved, Zlatkis said the draft regulations will also control the payment of charter capital and the emission of securities onto public markets, tighten the definition of what qualifies as a security, and control fraudulent practices.


Zlatkis denied reports in the Western press that the draft law would discriminate against foreign investment institutions.