Three former employees of Sistema JSFC unlawfully used insider information for their own interests, the regulator said. The violators are A. N. Buyanov, N. K. Nosova and A. Yu. Goncharuk, the press release says. We are talking about Alexander Goncharuk, the former president of Sistema, and at that time the deputy chairman of the board of directors of AFK, Alexei Buyanov, the former first vice president of AFK, and Nadezhda Nosova. The latter worked in the financial department of the corporation, says a person close to Sistema.

All three, according to the Central Bank, used insider information for transactions in the company’s ordinary shares in July 2014. They were carried out several hours before AFK published information that caused a decline in its stock prices by more than 7%. The operations helped three managers avoid losses, the total amount of which amounted to tens of millions of rubles, the Central Bank notes. The use of insider information to carry out transactions with financial instruments is a violation of the requirements of Art. 6 of the Law “On Combating the Misuse of Insider Information and Market Manipulation,” the regulator reminds.

The inspection materials were transferred by the Central Bank to law enforcement agencies, the regulator said. The head of the main department for combating unfair practices in the open market of the Central Bank, Valery Lyakh, clarified through the press service that the documents have been sent to the Prosecutor General’s Office. It was not possible to contact a representative of the Prosecutor General's Office on the evening of March 16. A source in law enforcement confirmed that the application has been received and will be considered.

The press service of the Central Bank does not disclose other circumstances of insider trading - when the transactions were made, the number of shares sold or acquired.

The loudest message from Sistema for the period indicated by the Central Bank was dated July 15. In it, AFK announced the arrest of its stake in Bashneft. The information was published at 18.00 London time after the close of stock trading. The next day on the Moscow Exchange, Sistema shares fell by 7.74% during the day, and by closing the fall was 6.99%.

In July, Sistema did not publish any significant facts either in Russia or on the London Stock Exchange website about transactions with shares of Goncharuk, Buyanov and Nosova. Only the message dated July 11 states that, among other members of the board, Goncharuk received remuneration in shares, and his share increased from 0.1884 to 0.1892%. But the list of affiliates for the third quarter of 2014 states that Goncharuk’s share on July 9 decreased from 0.1884 to 0.008%. According to quotes that day, the sold package could have cost about $28 million.

Not only Honcharuk sold
As follows from the list of affiliates of Sistema, in addition to Goncharuk, AFK shares have been sold since July 9 by President Mikhail Shamolin (his share decreased from 0.1561 to 0%), as well as members of the board of directors Sergey Boev (from 0.0140 to 0.0008 %), Dmitry Zubov (from 1.0302 to 0.0103%) and David Yakobashvili (from 0.0043 to 0.0032%)....
Read in full

Not only Honcharuk sold

As follows from the list of affiliates of Sistema, in addition to Goncharuk, AFK shares have been sold since July 9 by President Mikhail Shamolin (his share decreased from 0.1561 to 0%), as well as members of the board of directors Sergey Boev (from 0.0140 to 0.0008 %), Dmitry Zubov (from 1.0302 to 0.0103%) and David Yakobashvili (from 0.0043 to 0.0032%). A representative of the Central Bank said that the regulator was investigating all market transactions.

The facts indicated by the Central Bank do not affect Sistema JSFC, but concern private individuals and former employees of the corporation, says Sistema JSFC representative Sergei Kopytov. Nevertheless, the corporation will take additional measures to improve the quality of corporate governance and transparency of activities, including in working with insider information, he promises. A person close to AFK claims that Buyanov resigned from Sistema before July 15, 2014.

The Criminal Code provides for several types of punishments for the unlawful use of inside information: from a fine of 300,000 rubles. to imprisonment for a term of up to four years.

No cases of insider trading cases have been recorded in open court databases, says Dmitry Konstantinov, a lawyer at Ilyashev and Partners. So this is the first high-profile case based on inside information. Identifying such cases is not an easy task, notes BMS Law Firm lawyer Vladimir Shalaev. Due to the fact that the practice of holding people accountable for such violations is not very widespread, we can conclude that there are no effective mechanisms for identifying such cases, he adds.

In Russia, unlike in the West, the practice of owning company shares among managers is practically not widespread, and there are few long-term incentive programs, states Alexander Shevchuk, executive director of the Association of Professional Investors. Therefore, there is less temptation on the part of managers and a precedent for investigating cases of use of insider information.

The Central Bank found insiders in Sistema