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. Last Updated: 07/27/2016

'Leader for Tomorrow' Is Back to the Future

MTU.S.-native Peter Derby set up brokerage Troika Dialog in the early 1990s.
He's back. Not exactly on a full-time basis, but Peter Derby, the founder of Russia's first brokerage, Troika Dialog, has come to lead a new business in Russia, though this time he's a nonexecutive chairman.

"That means I'm not in Russia every day," Derby said of his new role with U.S.-Russian loan aggregator CreditStar. "But, I'm interested in Russian equity and corporate finance," he added. The hint is: Other chairmanship offers in the pipeline will not go unanswered for long.

The man who also co-founded one of Russia's first private banks with an international license -- DialogBank in 1989 -- has been absent from the Russian business scene since July 1, 2001.

But, in a real sense, Derby left Russia much earlier, back in the infamous year of 1998, though the date and the reasons for the banker changing business scenes are not as obvious as they might seem.

Rather than the financial crisis of 1998, which led DialogBank to crumble, fall, and be liquidated a year later, Derby said his family circumstances dictated move back to his native United States. "In May '96, my wife told me: I'm giving you two years to transfer to the U.S., or I'm leaving without you," he said.

His eldest son, then three, faced growing up in a Russian-speaking environment. Derby himself, like his wife, was born in a Russian emigre family and was almost perfectly bilingual.

The banker first arrived in Russia in 1972, when he was 11, to visit family members strewn across the country.

Only 15 years later, after graduating from New York University and spending two years as an auditor at Chase Manhattan Bank, followed by a stint as chief financial officer at NatWest Bank USA, did Derby visit again -- as an interpreter for Billy Joel's Moscow concert in 1987.

By his third visit, in 1989, Derby meant business. He arrived to oversee the interests of a Chicago businessman who had invested funds in the first U.S.-Russian venture, Joint Venture Dialog. The company developed software such as the game Tetris to sell in the United States and spent its earnings on hardware for resale in Russia.

"The problem for him was sending money to Russia. What he needed was a bank," Derby said.

DialogBank appeared in the same year, its shareholders including the Chicago businessman, Moscow State University, the Central Economics and Mathematics Institute and a number of minority stakeholders including Derby, who also started as the bank's CFO.

Derby also wanted to set up an investment brokerage.

In 1990, when he arrived at the Finance Ministry to collect registration documents, however, a problem arose.

"In the ministry, I was told that Russia had no law on joint-stock companies. The legislation did not exist," he said.

A draft law, however, was being drawn up by a team including then-Finance Minister Boris Fyodorov. As an interested party, Derby joined the writing process, and the law came into force in December 1990.

On Jan. 18, 1991, Derby registered joint-stock company Troika Dialog in the name of two corporate parties -- DialogBank and Derby's 100 percent-owned Troika Capital Corporation -- and assumed the role of chairman.

To recruit staff, Derby turned to the universities. "Moscow State University sent me just one, but they said: 'This guy's outstanding,'" he said.

The outstanding student was Ruben Vardanian, who later went on to head the brokerage. Vardanian said he saw Derby as a "very talented businessman, rightly considered to be the guru of the securities market," and was caught up in the spirit of making a professional brokerage of global standards.

"At the start of the '90s, there was no stock market in Russia," Derby said. "I remember our first shares, those of Russia's Nipek oil company, we stood selling in the street."

Trading in shares was literally done from hand to hand, with a calculating machine on someone's knees, he said.

Initially, Troika Dialog's small team worked mostly on advising a few DialogBank clients steered to the brokerage by Derby, said Bernard Sucher, board chairman of Alfa Capital, who worked at Troika in 1993-96.

Despite the immaturity of the brokerage business, however, Derby insisted it act in a fair, transparent manner from the start. After its first year in business, Derby spent $23,000 of Troika's $25,000 profit on an audit.

"Derby maintained a public posture of rectitude in an era where thievery and worse was rampant," Sucher said. "This concern for ethical business, strongly reinforced by Ruben and by me, led to Troika Dialog adopting formal and informal standards of behavior that were well above the prevailing standard."

The ethical stance paid off. Within two years of its inception, global management consultancy Merrill Lynch became a Troika client, and Goldman Sachs investment bank tried lure the Russian brokerage's staff.

What kept all but one of the staff from leaving was the strong ethos and belief instilled in the business, Derby said. Even with relatively few funds, and "occasionally none," the company operated on the principle of being "built for Russians, from Russians and with Russians," he said.

For support, Troika also had access to DialogBank facilities, client referrals and banking services, which was crucial as voucher trading picked up, and saw the brokerage through the difficult 1993-95 period, Sucher said. However, as Troika's trading volumes increased and the brokerage needed stronger strategic oversight, DialogBank's support became of less value. Derby departed from the brokerage in 1997.

Whatever the reasons behind Derby leaving Troika and later Russian business after 11 years of working in Russia, the achievements of the man who at his peak controlled a banking mini-empire in Russia sound impressive.

At the 1997 World Economic Forum in Davos, Switzerland, he was named a "Global Leader for Tomorrow." The same year, he set up a mortgage bank -- Development and Restructuring Bank, later the platform for Delta Bank -- and DialogBank recorded its sixth straight doubling of annual net income.

By the time Derby left for the United States, eventually going on to work as a top executive at the U.S. Securities and Exchange Commission, the banker had a definite reputation, remembered well in many circles, challenged in others.

In his own words, he is a man "with Russian traditions and American values." And now that he has left the commission, the possibility of returning to Russian business sets his eyes aglow.

Vardanian said he would not exclude future "mutual projects" with Derby.

Traditions, after all, have a way of persisting.