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. Last Updated: 07/27/2016

Decrees Pull Teeth FroWatchdog

In the two years since its creation, Russia's Federal Securities Commission has brought a measure of order to a stock market known primarily for stock dilutions and wiping shareholders off company registrars. Some of its toil has been slow and many problems remain, but the commission stands out as one government agency that has been doing its job well.

Now, it seems, the commission has been caught up in a bureaucratic game of infighting that threatens investor confidence in Russia's still young and vulnerable markets.

Under an Aug. 14 presidential decree laying out the structure of the new government, the commission was transformed from a body with ministerial power that reported directly to the president into a state committee subordinate to the government. In plain terms, it has been demoted.

The new arrangement appears to conflict with a federal law on securities approved in April and a presidential decree confirming the commission's status that was signed as recently as July 1. But in Russia's legal climate, that could mean nothing.

Has the commission's status simply become mired in a bureaucratic thicket while Anatoly Chubais, its founder and patron, was away from the Kremlin on vacation? Maybe. Alarming as it would be to find that an official's summer holiday can spell bureaucratic doom for a generally respected government body, the damage in this case could at least be undone.

Yet from what can be gleaned so far, it appears that the commission and its powers are being eyed hungrily by other government bodies, notably the Finance Ministry and the Central Bank, with whom commission chairman Dmitry Vasiliyev had a public tangle with last year.

At stake may be more than just authority over paperwork. Market players describe two competing conceptions of the Russian securities market, a system along American lines stressing investment funds and shareholder rights, as advocated by Vasiliyev, and a German model placing more emphasis on the role of large banks.

There is plenty of scope for debate over what course Russia's developing financial markets should follow. But emasculating the one agency that many investors -- foreign and domestic -- had come to rely on for sensible regulation of the country's securities infrastructure is hardly the way to go about it. As one director of a Western brokerage in Moscow notes, enforcement powers are the key to the commission's success. There are plenty of other areas of the government where streamlining could be of use rather than picking on one that is functioning well. To undermine an agency on which so many hopes depend would be a cruel blow indeed.