Reform of the Concept of Insider Information

When speaking in regards to insider information regulation, it needs to be pointed out that the current Federal Law of Russian Federation No. 224-FZ “On combating the illegal use of insider information and market manipulation and on amendments to certain legislative acts” (hereinafter referred to as the Insider Information Law) has passed a rather difficult path of development.

The enactment of the law was preceded by a 10 year period of discussions, while the text of the bill has been constantly amended and the final consideration of the law was postponed twice. Finally, on July 27, 2010, the updated version of the law, which acts up until this moment, has come into force.

However, the reality of the market does not stand still and on August 3, 2018, a new law which prescribes amendments to the Insider Information Law was published. This law provides for a number of major changes, in particular, the list of persons referred to as insiders has been enlarged, the requirements for the submission of information have been clarified, and the basis for exemption from liability for the illegal use of insider information has been provided. Most of the changes are not yet active and will come into force on May 1, 2019.

At the same time, the new law also provides for a change of the content of insider information, as the list of insider information will cease to be exhaustive. We shall recall that at the moment a list of information regarded as insider information can be found in article 3 of the Insider Information Law and exhaustive lists established by the Bank of Russia. The new law provides for the lists of insider information directly compiled by legal entities. Such lists will be approved by the person performing functions of the sole executive body, and will necessarily include the information contained in the list of insider information established by Bank of Russia.

Commenting on the bill, the Chairman of the State Duma Committee on the financial market, Anatoly Aksakov, said that such lists “will allow legal entities to take into account the specificities of its work.” In addition, this change will certainly assist issuers, trade organizers and other persons which are subject to the law’s application in facilitating the procedure of proving in court, the issue of referring information, which is beyond the list established by the Bank of Russia in regards to insider information.

However, the current practice of the Bank of Russia in expanding the exhaustive lists of insider information and the related dissatisfaction of legal entities indicate that the internal lists of legal entities are likely to repeat the content of the lists of the Bank of Russia. This is largely related to the unwillingness of Russian issuers and financial institutions to disclose information, as well as the existing practice of the usage of published information to increase pressure on sanctions.

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