The Commission has determined a list of information prohibited from disclosure

government regulation

Yesterday, the State Securities and Stock Market Committee approved the draft decision “On the definition of information that is classified as insider”, for the first time formulating a clear list of information about the issuer, the disclosure and use of which before their official publication will threaten criminal liability for company employees and stock market participants. The latter have a positive attitude towards this decision, but believe that any participant in the stock market can bypass the norms of the State Securities and Stock Market Commission.

Yesterday, the State Commission for Securities and Stock Market (SCSM) approved the decision “On determining information that is classified as insider information.” Let us remind you that according to paragraph 1 of Art. 44 of the Law “On Securities and the Stock Market”, insider information is “any unpublished information about the issuer, its securities..., the publication of which may significantly affect the price of the securities.” However, a comprehensive list of insider information has not yet been defined. According to paragraph 4 of Art. 44, the State Securities and Stock Market Committee should have prepared it.

From the document, a copy of which Kommersant has, it follows that the list of insider information includes information from the issuer’s annual and quarterly reports on economic and financial activities. Insider information also includes “special information about the issuer”: making decisions on the placement of securities worth more than 25% of the authorized capital (CF); on the repurchase of own shares; facts of listing/delisting of securities on the stock exchange; obtaining a loan or credit in the amount of more than 25% of the issuer’s assets; change in the composition of shareholders (own 10% or more percent of the company's shares) and company officials. In addition, information about the issuer’s decision to create or close its branch or representative office was subject to a disclosure ban; the decision of the company management to reduce the authorized capital; open a bankruptcy case for the issuer or make a decision on its reorganization, as well as a company or court decision on its closure or bankruptcy. Thus, the regulator classifies the maximum amount of information about the issuer’s activities as insider information. It should be noted that, according to the document, information ceases to be insider information in the event of “its official publication.”

As Alexey Tarasenko, director of the department of methodology and regulation of the securities market of the State Securities and Stock Market Committee, told Kommersant, before this decision, “we had no insider information at all.” “Now we have accepted the list of this information, agreed on it with the State Committee for Entrepreneurship and are submitting it for registration to the Ministry of Justice,” said Mr. Tarasenko. According to him, the commission's decision will make the stock market transparent and equal. “The decision should create greater transparency when concluding transactions for investors with securities who will deal with these securities. This will create equal conditions for access to information,” the official is confident.

It is noteworthy that on February 23, 2006, Article 232-1 was introduced into the Criminal Code, providing for in the case of “deliberate disclosure or other use of unpublished or otherwise unpublished information about the issuer (insider information)” imprisonment for “up to three years.” with deprivation of the right to hold certain positions for the same period. As Sergei Ignatovsky, partner at the international law firm Arzinger & Partners, assured Kommersant, media and journalists who use information in their materials before its official publication should not fall under this article.

Experts positively assess the decision of the State Securities and Stock Market Committee. According to Alexander Klimchuk, an analyst at Concord Capital Investment Company, “this norm exists in all developed countries.” “And information that may affect the price of the issuer’s shares is kept in the strictest confidence,” Mr. Klimchuk told Kommersant. As an example of the use of insider information, the director of the Symphony #1 investment fund, Mikhail Royko, named Zaporozhkoks OJSC, whose shares were actively traded before the meeting of its shareholders by companies that refused to carry out the reorganization. In his opinion, it is also necessary to regulate the judicial practice of identifying insider transactions and introduce a procedure for their investigation.

However, stockists doubt that officials will be able to find the culprit who leaked insider information to the market, since there is no mechanism for such an investigation. “I’m afraid that this will not affect the market in any way. It will be very difficult to prove and bring to justice,” said Sergei Chernenko, director of AMC Kinto. According to the expert, any participant in the securities market who uses insider information, if necessary, can prepare an analytical forecast of the company’s condition, which will refute its connection with insiders.

PETER SHEVCHENKO

The State Securities and Stock Market Committee spoke out against insiders