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. Last Updated: 07/27/2016

Vyugin Pushes Firms to List at Home First

VedomostiOleg Vyugin
The Federal Service for Financial Markets is planning to tighten the law to stop Russian companies from listing on foreign markets before listing at home.

The announcement by service chief Oleg Vyugin came as a reaction to retail giant Pyatyorochka's $600 million IPO in London earlier this month.

Credit Suisse First Boston and Morgan Stanley, the lead managers of the IPO, offered Russia's largest retail chain "an unacceptable scheme -- from an ethical point of view -- that goes against the interests of the Russian market," Vyugin said, Interfax reported on Saturday.

Market watchers embraced Vyugin's position on introducing amendments to existing law as a good move for developing the country's securities market.

"This can only be positive for the market as a whole," said Mark Jarvis, Ernst & Young managing partner for markets in the CIS. "From the transparency and investor protection point of view, it makes sense."

Vyugin is powerless to control companies listed abroad. A Russian firm could do something wrong at home but would be able to continue trading as usual on foreign markets, Jarvis said.

On Friday the market watchdog chided Pyatyorochka for not receiving its approval before listing in London.

According to existing legislation, Pyatyorochka did not break the law, said Olga Kudinova, a spokesperson for the service. "We just wanted to note that we see the real picture," she said, because the bulk of the supermarket chain's assets are in Russia.

It is too early to discuss the details of how or when the law to ensure that companies list on domestic markets before going abroad could be changed, Kudinova said.

Pyatyorochka was unavailable for comment Monday.

In his comments to Interfax, Vyugin urged foreign investment banks to stop working with owners of domestic assets on deals similar to Pyatyorochka's. The practice diverts companies from listing in Russia, he said, and destroys the pricing system of Russian assets.

"The regulator is defending his position," said Christopher Granville, chief strategist at UFG. "This is a positive move for the market."

Trading of Russian shares totals $25 billion per month but only about one-third of that takes place inside the country, Vyugin said in November.

The RTS and MICEX saw their total number of IPOs drop from 17 in 2003 to 12 in 2004, but the total volume of money raised went from zero to 241 million euros, according to PricewaterhouseCoopers.

"Listing in your home country first is the general strategy around the world, ... [but] it's more costly for companies to list both at home and abroad," Jarvis said.

Vyugin said that listing in Russia is "a fairly inexpensive and formal" process.

"We understand it's necessary to attract capital and we are not hindering this. However, we ask everyone to uphold a simple principle -- listing in Russia first," Vyugin said.