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. Last Updated: 07/27/2016

Federal Securities Law An 'Evolutionary' Step

On April 16, 1996, President Boris Yeltsin signed a new federal law (No.39-FZ, "On the Securities Market"), that became effective April 25. The new law is evolutionary rather than revolutionary. In general, it codifies provisions formerly scattered among a number of edicts, regulations, and instructions. Among the principal new provisions are:


?The governing regulatory authority is renamed the Federal Securities Market Commission and given expanded powers.


?Periodic disclosure, including quarterly reports and reports of significant events, is now required.


?The registration process for the issuance and sale of securities by open joint stock companies has been modified.


?Restrictions on insider trading have been toughened.


?The obligations of registrars and depositaries are set forth in considerably more detail.


?A framework for the establishment of self-regulatory organizations has been provided.


As far as brokers and dealers are concerned, the chief new feature is the introduction of the concept of "professional participant in the securities market," which includes not only brokers and dealers but also depositaries, clearing houses, registrars, and the broadly defined "securities managers." Professional participants, which can be either legal entities or individuals registered as entrepreneurs, must be licensed by the Commission or by agencies authorized by the Commission.


Given Russia's traditional reliance on book entries rather than share certificates, the new law gives more prominence than one might expect to depositaries. They are defined in the new law and made subject to a number of obligations and restrictions.


The law distinguishes in detail among bearer securities, securities evidenced by a share certificate ("certificated securities"), and "uncertificated" or book-entry securities. It also creates a hybrid of the last two forms by allowing the issuer of certificated securities to require that the securities be stored in a centralized depositary.


Article 8, the longest single article in the securities law, is designed to make registrars both independent in fact and reliable, setting forth in considerable detail provisions for their establishment and operation.


The securities law requires quarterly reports resembling the U.S. quarterly report. The quarterly reports are to contain, among other things, financial statements, discussions of significant transactions, and discussions of events leading to increases or decreases of more than 10 percent in the issuer's assets. The report must be filed within 30 days of the end of the quarter.





Jim Christiansen is an attorney specializing in securities law at the Moscow practice of Coudert Brothers.