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. Last Updated: 07/27/2016

Analysts Decry Securities-Law Veto

President Boris Yeltsin's veto of a draft securities law drew criticism from analysts and officials Thursday, who said the rejection reflected little more than political infighting, while investors adopted a wait-and-see attitude.


Yeltsin vetoed the draft law Wednesday, after it was approved by the State Duma and the Federation Council.


He said in a letter to Duma Speaker Ivan Rybkin that the bill contradicted existing legislation and included an objectionable section regarding registrar activities, Interfax reported.


Under Russian law, the president may now offer his own amendments to the bill and send it to restart its legislative process in the Duma.


Many analysts said the president's refusal to sign the bill marked one more blow in the battle to control Russia's burgeoning capital markets.


"The president thinks that the Duma is once again meddling with the constitutional authority of the president in the forming of executive structures," said Tat-yana Nesterenko, a member of the Duma's budget committee.


"He also doesn't like some of the constructions [in the bill] concerning the State Securities Commission," she said.


Lawyers said the final draft law curtailed many of the securities commission's powers.


"It seems to me [the veto] is the result of the president and the legislature fighting," said Diana Downing, head of representation at the law firm MIllbank & Tweed.


"The version of the law that went through the Duma gave the securities commission a lot of power, the version that went to the Federation Council took away some power and gave it to the regional commissions," she said. The Federation Council is comprised of appointed leaders from the regions.


Government and legislative agencies have been vying for control of the rapidly developing securities market, with the president, the Finance Ministry, the Securities Commission and even the Central Bank getting into the act.


Konstantin Melnikov, director of the Rinaco-Plus brokerage, agreed that power-mongering could well have been behind the veto.


"I think the reason is that some of the government agencies are given some of the powers that they didn't have before, and it could be that some other agencies are not ready to accept that," he said.


"Everything should be there in the law so it can act directly, with no further references to other agencies," he added.


Yeltsin said in his letter that the bill contradicted legislation in the first part of the Civil Code in its definition of a bond, and objected to a section allowing organizations to serve as both brokers and depositories, Interfax reported.


"If things like allowing registrars to be brokers and traders were not removed earlier ... then it's right that Yeltsin vetoed it," said Victor Huaco, president of brokerage AIOC Capital.


But Melnikov called the veto "a bad occasion, very unfortunate," citing provisions in the bill on registrar requirements and business transactions that he said would help the market.