Translated material
Issuer, open your face
Companies issuing shares and bonds will become more transparent
The Russian government yesterday approved amendments to the federal law on the securities market, which are aimed at improving the working conditions of investors, providing them with information about issuers of shares and bonds and, accordingly, reducing risks in transactions with securities. The head of the Federal Service for Financial Markets, Vladimir Milovidov, notes that the main amendments relate to two factors. The first is related to the reliability of securities and issuers, the second is related to pricing in this market.“As for reliability, the innovation consists, firstly, in the fact that we are transferring into direct legal provisions the requirements for disclosing information on secured bonds, regardless of the legal form of the organization. Today, joint stock companies disclose information, and limited liability companies, which are sometimes issuers of bonds, fall outside the scope of the law on joint stock companies,” Mr. Milovidov explained to Vremya Novostey. Now this legislative gap has been eliminated.
Secondly, according to the head of the Federal Financial Markets Service, the changes concern “significant events that may affect the financial stability of the issuer itself, since the cost bonds is directly related to the state of the company and those legal entities that provide security for bonds.”
The issuer must inform the market, for example, about the threat of bankruptcy, lawsuits against it, or change of collateral. Or a major transaction by a company that has provided collateral for a bond, resulting in a significant change in its financial assets. “If the volume of a transaction exceeds 10% of the value of assets, then it requires disclosure,” says Vladimir Milovidov. “If the issuer or collateral is planning a reorganization or filing for liquidation, that information must also be disclosed.” “That is, we are monitoring all the possible factors that may affect the security of the bond,” emphasizes the head of the Federal Financial Markets Service.
According to Mr. Milovidov, the transfer of all these information disclosure rules from the regulations of the department he heads into the law will not only increase the responsibility of issuers, but will also give a certain signal to the market. “The current situation in the world regarding debt is unstable, so bonds, of which there are more and more, are a risky instrument. And, of course, it is necessary to take measures to facilitate the disclosure of all factors that can destabilize the securities market,” the head of the federal department is confident.
Vladimir Milovidov conventionally calls the second innovation fair pricing. We are talking about the rules for disclosing information by insiders - companies that buy securities of related structures. “For example, a subsidiary sells or buys securities of the issuer. Thus, this company has some inside information, and the market should know about these transactions. Also, the market must have information about the purchase by company managers - members of the board of directors or board of directors - of shares of the company they manage,” says Mr. Milovidov. In addition, all transactions with shares containing more than 5% are subject to disclosure. “We believe that such disclosure of information is largely a preventative measure against unfair transactions,” notes Mr. Milovidov.
The next innovation is related to the disclosure of information by securities issuers about actions with shares or bonds of other companies. “Investors should understand that a company that issues securities on the public market is itself engaged in transactions on the financial market, and under certain circumstances its financial position may worsen,” notes the head of the FSFM.
And one more innovation: after the amendments approved yesterday by the Cabinet of Ministers come into force, Russian issuers that issue securities on foreign markets will be required to disclose in Russia all information that they publish abroad. “As a result, in Russia an investor will have a wider range of information,” says Mr. Milovidov.
The head of the Federal Financial Markets Service hopes that amendments to the law on the securities market will be adopted by the State Duma during the autumn session. They must come into force three months after official publication.