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. Last Updated: 07/27/2016

MMM-Type Fund Restructures

Russia's securities watchdog will permit the transformation of the first MMM-type, unlicensed investment company into a legitimate unit investment fund, the chairman of the Federal Securities Commission said Tuesday.

Dmitry Vasiliyev told journalists that the closed-stock company Russky Dom Selenga will be reorganized into two separate unit investment funds, similar to U.S. mutual funds or British unit trusts.

Vasiliyev said the temporary permission is only one more step on the road to getting an official license, and he stressed that the commission's decision does not allow Russky Dom Selenga to take investors' money.

"This temporary permission does not grant the right to attract cash from citizens, a right which no financial company can have until it ... receives a license," he said.

The company, based in Volgograd, was one of 883 unlicensed investment companies ordered by the commission last August to close down or be restructured into a unit investment fund.

Millions of shareholders lost big savings in such schemes, most notably in the collapse of pyramid scheme MMM, which has begun new television commercials and is again selling shares.

But Russky Dom Selenga was the first of the unlicensed firms to receive permission to restructure into a legitimate fund. Vasiliyev said only five other companies had applied to become unit investment funds. Russkaya Nedvizhimost put in its request last fall.

Vasiliyev said that Russky Dom Selenga will be split into two funds because of the nature of its assets, which break down into material and financial assets.

The first fund will have assets of cars, trucks, airplanes, buildings and technological equipment valued at 389 billion rubles ($80.6 million), he said.

The second fund is valued at 810 billion rubles ($167.9 million), based partly on links with 12 banks. Both Vasiliyev and the founder of Russky Dom Selenga, Alexander Solomadin, declined to specify which banks were in the group.

Vasiliyev also said the commission presented to the government in December a program to protect shareholders' rights, including measures to strengthen ties between market regulators and law enforcement bodies. He said he hopes President Boris Yeltsin will sign it soon.

?The Varshavskoye Shosse office of the notorious MMM investment fund, still headed by Sergei Mavrodi, reopened in February, and is now styling itself a "System of Mutual Voluntary Charity," Izvestia reported Wednesday.

MMM is still headed by Sergei Mavrodi.

The paper said "the rules are new and more complicated, but the idea is the same -- a pyramid scheme." has been conducting business anew since February, the paper said.