On February 9, 2009 the Russian State Duma adopted amendments to the Federal Law on the Securities Market and to the Administrative Code of the Russian Federation (the “Amendments”). The Amendments came into force on April 14, 2009, and: (i) clarified and expanded the concept of manipulation of the securities market; (ii) introduced administrative penalties for manipulation of the securities market; and (iii) toughened the penalties for other violations of the securities market.
According to the Amendments, any market participant can now be found liable for manipulation of the securities market (previously only professional dealers could be found liable). Manipulation of the securities market is deemed to occur when acts or omissions result in either an increase, reduction or maintenance of: (i) the price; (ii) offer or demand; or (iii) trading volume, of any given security. The list of activities that can be deemed to be “manipulation” include, among others:
- the circulation of false or misleading information (including any advertisements) that influences or might influence the trading of a security;
- the trading of securities at a price significantly different from the price of such security on that day (provided that there is a prior agreement to trade at such price);
- the repeated failure in any single day to perform certain transactions for a security when such failure leads to a significant change in the price of the security (provided that transactions made by other traders did not significantly influence the price for such security);
- a series of trades of the same security made for the benefit of the same person in any single day without any obvious economic, or other legitimate, justification (provided that eventually the owner of the securities does not change as a result of such trades); and
- the issue of instructions to traders to trade in the same security when the buyer and seller of such security act for the benefit of the same person.
However, even if certain activities fall within the scope of the amended definition of manipulation, such activities might be excluded from the definition of manipulation if:
- performed by governmental authorities within the scope of their powers for the implementation of monetary policy or management of state debt; or
- performed as a public offer (when there is a risk of price reduction) or a buy-out when required by law.
In addition to the above, the Amendments have introduced administrative penalties for manipulation of the securities market, including a fine of up to 1 million rubles, or prohibition from serving in the capacity as an executive or board member of a legal entity for up to two years. The Amendments have also increased the penalties for certain other violations, including, among others:
- violation by the issuer of the procedure for issuing securities;
- obstructing the implementation of rights attached to securities;
- violation of the rules for maintenance of the register of securities; and
- improper use of insider information.
In addition, the statute of limitations for liability for offenses related to the securities market (including manipulation) has been increased from two months to one year from the date of the alleged offence. Finally, the Federal Service on Financial Markets has been authorized to hear cases of violations on the securities market (including manipulation).