"Rossiiskaya Gazeta": "GOVERNMENT GOES AFTER THE STOCK MARKET"
The White House has approved tougher punishment for insiders
The G20 meeting in London in April is expected to produce a decision on changing the rules of financial market regulation, above all to improve the work of banks.
At the same time, Russia, as a member of the group that has recently devoted all its efforts to combating the world crisis, is trying to make its own stock market more civilized. The Government Presidium ruled yesterday to make manipulations in the securities market a criminal offense. The ministers targeted insider trading.
Insider trading has long been the subject of discussion in Russia. The Draft Federal Law On Counteracting Improper Use of Insider Information and Market Manipulation has been under discussion since the 1990s. Versions of the document have been repeatedly introduced at the State Duma but have invariably been lost traveling between offices in search of approvals. The Government made a fresh attempt and introduced another draft in the lower house of Parliament in December 2008.
The timing of the Government's effort to make the stock market more civilized is not fortuitous. The other day the concept of creating an international financial centre
in Russia was unveiled, and that will be impossible to do without solid and clear-cut legislation. "Punishment for the use of insider information must be real and inexorable" Prime Minister Vladimir Putin said. Head of the Federal Service of Financial Markets Vladimir Milovidov specified the penalties by dividing stock market crimes into three groups. The first group involves violation of the procedure for registration of rights in securities and abuses in keeping the register of shareholders (carries a prison sentence of up to 6 years). The second group includes obstruction of the exercise of the rights of shareholders, their exclusion from shareholder meetings, or restriction of shareholders rights during the meeting (up to 5 years). Finally, manipulation of securities prices may carry a prison sentence of up to 7 years. "These are tough measures, but in developed countries dishonest actions are treated as crimes that carry severe punishment," Mr Milovidov stressed. At the same time, he noted that in the West thousands of suspect transactions are registered every year but only two or three, or at most 10, cases see culprits prosecuted and forced to compensate for the damage they caused. Interestingly, the draft law envisages liability of the media for spreading insider information. Mr Milovidov hastened to add that the Federal Service of Financial Markets was not going to control the journalists. The most outrageous instances are sure to catch attention anyway and the culprits will have to answer under the new law.
"The global crisis has demonstrated the dangers of lapses of state regulation, of ignoring risks and of the existence of large segments of the market that are not controlled by the fiscal authorities". This was how Vladimir Putin explained the aim of his Cabinet's efforts to form an effective system of control of the financial markets and entrepreneurial activities. Business often assesses the situation and investment strategies proceeding from the data of rating agencies, primarily foreign ones. The Government will put that department in order, as well. From now on, the Ministry of Finance has the authority to accredit international rating agencies in our country. According to Mr Putin, the Government also uses ratings when choosing banks or other financial institutions in which to put reserves and accumulated pensions. "We all understand the influence a rating agency commands and understand the dear price of mistakes, let alone abuses in their activities," he explained. He also spoke in favour of creating Russian rating companies that "will be able to address the specificities of the Russian market more fully". Vladimir Putin stressed that the procedure of accreditation must be voluntary and transparent.
It cannot be ruled out that Russia will be taken up on these and similar promises during the G20 summit in London. The leading countries will probably remind Moscow of its commitment to refrain from protectionist measures achieved by the G20 during a similar meeting in Washington last year. For example, the fact that the Russian authorities support the automobile industry by raising car import duties is still severely criticized in Japan. Another measure aimed at stimulating consumer demand for domestic products was the Prime Minister's decision in December to subsidize two-thirds of the interest rate on loans issued by banks for the purchase of cars assembled in Russia. Vladimir Putin yesterday asked Igor Sechin how his instructions were being carried out. He also asked for a report on whether the Government agencies were switching to procuring Russian-made cars for official use. The Deputy Prime Minister complained about insufficient budget financing. The Prime Minister did not argue and supported Sechin's proposal to increase spending on subsidizing interest rates and the purchase of cars. However, the G20 will have enough problems to discuss besides Russia's domestic issues. Finance Minister Kudrin says that the forum will improve auditing and accounting rules in order to "more clearly reflect risks in the balances of credit institutions so that they do not build up and create the kind of problems that have arisen during this crisis". Mr Kudrin is sure that in this way the countries will work out uniform financial standards aimed at maintaining macroeconomic stability.
The London meeting, on which the Government pins great hopes, was not the only international item discussed yesterday. The Government also approved a draft law on ratification of the European Social Charter. "The aim of that document is to ensure high social standards for the citizens of all the European states," Vladimir Putin said. He said that all the provisions of the Charter - the right to work, education, healthcare, pensions, and support of invalids - were inalienable parts of Russian legislation. However, the implementation of these provisions in Russia leaves much to be desired. At the same time, he said that social obligations will be the Government's priority even amid the global crisis. "In any case, the budget earmarks should not be touched," Vladimir Putin said referring to the social commitments. To confirm his words, he promised four indexations of pensions this year instead of the three originally planned. The Government proposed to raise the basic and insurance parts of pensions on March 1, April 1, and December 1, as this newspaper reported in its previous issue. However, Vladimir Putin, proposed to raise pensions again on August 1 taking into account the fact that inflation could exceed the forecasted level. "I ask the Ministry of Finance to include these resources in the budget amendments we are currently preparing," Vladimir Putin stressed.
The Prime Minister has also agreed to increase Government spending on advertising milk and dairy products, though not on cutting their prices. This was the Prime Minister's reaction to the laments of the Minister of Agriculture that consumption of dairy products had dropped by 5%.
"Well, why didn't you bring some milk here and treat us? Don't be stingy," Vladimir Putin smiled.
"I wasn't prepared for such a turn of events," Gordeyev replied, drawing laughter from the Cabinet of Ministers.
"You have to be prepared for any turn of events," Vladimir Putin warned, turning serious. Obviously, the warning was addressed also to all those who had laughed.
Moscow issue
Pier Sidibe
