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. Last Updated: 07/27/2016

FSC Calls for Power To Protect Investors




Russia's securities watchdog the Federal Securities Commission is pushing harder for investors' rights but still lacks sufficient power to do a thorough job, FSC's outspoken chief Dmitry Vasilyev said Tuesday.


A law on protecting investors' rights, passed in March, gave the FSC additional powers, such as the authority to fine companies that violate securities rules and to have a say in courts trying investor rights cases.


The law also enabled the FSC to last week suspend trading in shares of 290 companies that did not provide quarterly financial reports to the commission.


However, a high-profile investor rights dispute at oil major Yukos is showing that major corporations are still out of the commission's reach, Vasilyev said at a news conference.


After launching an investigation of Yukos earlier this year, following complaints from minority shareholders who said they were being cheated, the FSC has failed to receive the information that it requested from the company as well as from other state agencies whose cooperation it had sought, Vasilyev said.


The Antitrust Ministry has not provided ample information on Yukos and the Fuel and Energy Ministry and the Tax Ministry simply neglected to respond, he said.


Yukos spokesman Maxim Puchkov denied that the company did not provide full information to the FSC and said Yukos has not received any complaints from the commission over the issue.


"We are holding talks [with the FSC] and providing all the information required," he said. "As far as I know, there have not been any problems with that."


Vasilyev, meanwhile, hailed recent legal victories scored by Yukos' minority shareholders, who are trying to prevent share issues in three Yukos subsidiaries that would dilute their stakes, but he did not reveal any results of the FSC's own investigation.


He said, however, that the commission would not register the issuances by Yukos' three subsidiaries until it receives all the information it has required from the company.


To obtain the leverage it needs to protect investors' rights, the FSC must have the same powers as those granted to the Antitrust Ministry under the recently adopted law regulating competition on the financial market, Vasilyev said.


The law authorizes the committee to force state organizations to hand over any information it needs to conduct probes.


The FSC now only has the right to impose fines on corporate offenders, but large companies "are not afraid of the fines," which cannot exceed 10,000 minimum salaries, or about $30,000, Vasilyev said.


Oleg Fyodorov, head of the investor rights department of the National Association of Market Participants, or NAUFOR, said that even though Vasilyev felt the commission lacked enough power, it was much stronger now that it was armed with the March law. "Before the law on investor rights was passed, the FSC had no authority at all," Fyodorov said.


"The new law boosts the FSC's authority in theory, but its wording is vague and the commission will have to fight for every right it was granted," he added.


Vasilyev said that with corporate governance still in an embryonic state, investing in Russia remains a gamble.


The stock market may be booming again, but investors should realize that "it remains risky [because] many procedures have not been worked out," Vasilyev said.