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FFMS to fight insider trading and money laundering

[17.08.2007 - 17:22] © GAAP-IFRS.com
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Russian Federal Financial Markets Service’s functions are being restructured for more efficient prevention of money laundering and inside information abuse. Initiative comes from the agency’s current chairman, Vladimir Milovidov. Market participants predict increased attention from the regulator’s side and increased number of penalties.

For realization of these plans, FFMS creates a new division. Some major investment companies are already aware on this subject and relayed this information to Russian media editions. “FFMS tries to be like US Securities and Exchange Commission and to look not only after trading deals, but also after the preceding negotiations”, - said one of the banker, whose name is left undisclosed. - “This means listening to private telephone calls and even questioning professional market participants to gain even more control”. Vladimir Milovidov confirmed creation of the new division. He said that it was formed as a part of recently created Financial Information and Market Control Service within FFMS. He added: “By that, we plan more close and efficient cooperation with the Federal Financial Monitoring Service to fight money laundering”. However, he declined all speculations about Federal Financial Markets Service listening to private telephone calls and interrogations of market participants in cases where suspicion arises.

Currently, there are six people working in the department, but their number is expected to increase.

Market participants state that these reorganizations are vital for the Services’ efficient functioning. Arshak Manasov, head of the “Rye, Man and Gor Securities” investment company says that “FFMS needs closer attention to market participants to successfully fight insider trading and money laundering”. And for that, it needs closer contact with them. Oleg Vyugin, former chief of the FFMS (and current chairman of the MDM-bank) thinks that the most efficient way to uncover insider trading cases is gathering information about suspicious deals by surveys of participating traders.

During this year, there were two major investigations of insider trading cases – trading of “Polyus gold” shares and “VTB” shares. In both cases, the Federal Financial Markets Service came out with almost zero results. 

But despite this, experts are afraid of increased number of fines and cancelled licenses. Sergei Berezhnij, head of the Deutsche Bank’s department of trust- and securities trading operations noted that “current market fines for violations were small and were rarely charged – thus, it would be logic for FFMS to increase their number” (the Code of administrative violations stipulates 10 thousand rubles at max as a fine for violation of securities trading legislation). However, experts consider those moves by the authority as too early. Peter Lanskov, deputy chairman of the Professional Association of Registrars, Transfer Agents and Depositories (“PARTAD”) says that “FFMS should have started with adoption of legal framework, which is absent at the moment”. Alexander Scheglov, “Zerich Capital Management” CEO adds: “In order to listen to private telephone calls and for questioning suspects FFMS needs cooperation with law-enforcement authorities. It should also be authorized for doing this – and in order to be, amendment to the law legislation are needed”.

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