Equity capital markets in Russian Federation: regulatory overview

A Q&A guide to equity capital markets law in the Russian Federation.

The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.

To compare answers across multiple jurisdictions visit the Equity Capital Markets Country Q&A tool.

This Q&A is part of the global guide to equity capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/equitycapitalmarkets-guide.

Contents

Main equity markets/exchanges

1. What are the main equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year.

Main equity markets/exchanges

Moscow Exchange (MOEX) (http://moex.com) is the largest exchange in Russia. MOEX hosts trading in equities, bonds, derivatives, currencies, money market instruments and commodities. MOEX is among the top 30 leading stock exchanges worldwide. MOEX's Main Market Sector includes the Equity Capital Market and Debt Capital Market.

The Saint-Petersburg Exchange (SPB Exchange) (http://spbexchange.com) is another Russian exchange. However, MOEX holds an almost monopolistic position. Its major advantage is broad variety of markets including securities, derivatives, foreign exchange, money and precious metals markets. The SPB Exchange mostly trades foreign companies' shares (Apple, Google, Twitter). The advantages of the SPB exchange are access to investment in securities of the largest global issuers and, as the minimum lot size is one share, a small barrier to entry.

Market activity and deals

Polymetal International plc was the first foreign company whose shares were listed in Russia. However, generally only Russian companies are listed on MOEX.

The most successful deals in 2015 were made by:

  • United Wagon Company (IPO of RUB73.9 billion).

  • CREDIT BANK OF MOSCOW (IPO of RUB13.2 billion).

  • TNS Energo (IPO of RUB17 billion).

  • MOEX (secondary public offering (SPO) of RUB16.04 billion).

Some IPOs have been postponed (Metro AG, Detsky Mir Group, Metalloinvest).

 
2. What are the main regulators and legislation that applies to the equity markets/exchanges in your jurisdiction?

Regulatory bodies

As the main regulator for the Russian financial markets, the Central Bank of the Russian Federation (CBR) performs the following primary functions:

  • Regulation of securities issues, prospectuses and reports registration.

  • Control and supervision of compliance by issuers with the requirements of federal legislation on joint-stock companies and securities.

  • Regulation, control and supervision of corporate governance in joint-stock companies.

  • Control and supervision of compliance with the requirements of federal legislation on countering the illegal use of insider information and market manipulation.

  • Regulation of professional activity in the securities market.

  • Protection of the rights and legitimate interests of shareholders and investors in the financial markets.

  • Admission of securities to public placement, circulation and quotation.

  • Issuing listing rules and regulations.

Legislative framework

The main Russian federal laws applicable to the equity markets are the following:

  • Civil Code.

  • Law on the Securities Market.

  • Law on Organised Trades.

  • Law on the Joint Stock Companies.

  • Law on Clearing and Clearing Activity.

  • Law on the Central Securities Depository.

  • Law on the Protection of Rights and Lawful Interests of Investors in the Securities Market.

  • Law on the Central Bank of the Russian Federation.

  • Law on Counteracting the Unlawful Use of Insider Information and Market Manipulation.

  • Tax Code.

  • Administrative Violations Code.

  • Criminal Code.

There are also a number of rules and regulations of the CBR and Federal Service for the Financial Markets (FSFM) in relation to equity markets and exchanges.

 

Equity offerings

3. What are the main requirements for a primary listing on the main markets/exchanges?

Main requirements

Under Russian legislation, the term "listing" means inclusion of securities in the list of securities admitted to trading on the stock exchange.

The FSFM Rules establish the main requirements for primary and secondary listing. Additional rules were adopted by MOEX.

The main requirements for a primary listing are the following:

  • Compliance of securities with Russian legislation.

  • Registration of prospectus (if necessary, for public trading in securities).

  • Disclosure under the rules of MOEX.

  • Accounting in accordance with International Financial Reporting Standards.

  • The securities' acceptance for Settlement Depository services.

  • At least a three-year period of existence and a certain corporate structure of the issuer.

These are common requirements for all types of securities trading on MOEX. For certain types of securities, the requirements may slightly vary.

Minimum size requirements

Depending on the type of shares, free-float ratio and market capitalisation of the issuer, the minimum size requirements of the total market value of free float of the issuer vary between RUB1 billion and RUB3 billion.

Trading record and accounts

Consolidated financial (accounting) statements or, if these are not available, separate financial (accounting) statements must be prepared and disclosed, with an auditor's opinion certifying their accuracy. In some cases, the statements must be prepared in accordance with the International Financial Reporting Standards or other internationally recognised rules.

Minimum shares in public hands

Generally, the number of issuer's shares in free float must be at least 10% of the total number of its issued ordinary shares.

 
4. What are the main requirements for a secondary listing on the main markets/exchanges?

The secondary listing requirements are mainly the same as the requirements for primary listing (see Question 3).

 
5. What are the main ways of structuring an IPO?

An IPO is a type of offering according to which the company shares are sold to the general public for the first time. An IPO is usually structured in one of the following ways:

  • Offer for subscription, involving an offer of new shares issued by public offering. This type of structuring is usually used for increasing the share capital of the company.

  • Offer for sale, involving an offer of existing securities to the current shareholders. The shareholder's offered shares are usually recovered in full or in part through a subsequent issue of new shares (follow-on), performed after an IPO.

  • A combination of these.

 
6. What are the main ways of structuring a subsequent equity offering?

The main ways of structuring subsequent offerings are usually the same those for an IPO (see Question 5).

 
7. What are the advantages and disadvantages of rights issues/other types of follow on equity offerings?

The legislation concerning the procedure for public equity offerings does not expressly provide for the concept of rights issues. The requirements for follow-on equity offerings remain the same as for an IPO, and a company conducting a follow-on will have already made an IPO and its shares will already be listed in a stock exchange. Therefore, any subsequent public offering can be conducted (as with an IPO):

  • In the form of follow-on where a company offers new shares to the general public.

  • In the form of secondary listing where a company offers shares to the shareholders of the company without issuing new shares.

  • As a combination of these.

 
8. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depositary receipts?

Procedure for a primary listing

For Russian issuers, the steps for a primary listing include:

  • Ensuring the securities' compliance with the requirements of the laws of the Russian Federation, including regulations governing the financial markets.

  • Registration of a prospectus for securities with the CBR.

  • Disclosure of information in accordance with the stock exchange rules or the securities laws in respect to the issuer's ownership of shares or bonds of a foreign issuer.

  • Acceptance of securities by the National Settlement Depository (NSD), the central securities depository of the Russian Federation and part of the Moscow Exchange Group (except in the event of securities placement).

Procedure for a foreign company

For foreign issuers, in addition to the basic requirements applied to Russian issuers:

  • An issuer of foreign securities, foreign depositary receipts and/or issuer of underlying securities must make greater information disclosures to the stock exchange under the securities laws.

  • The securities must have an International Securities Identification Number (ISIN) and Classification of Financial Instrument Code (CFI).

  • The securities must qualify as securities under the CBR regulations.

  • There must be no Russian or foreign legal limitations that prevent foreign securities from being offered to the general public in Russia.

  • There must be a listing agreement and securities prospectus.

Foreign companies can issue Russian Depository Receipts (RDRs) certifying foreign shares. The RDR listing procedure is similar to the procedure for share listing (see above). However, RDRs have some distinguishing characteristics:

  • RDRs do not have a par value.

  • RDRs confer ownership rights to a certain number of shares or bonds of a foreign issuer (underlying securities).

  • RDRs confirm the holder's right to receive from the RDR issuer the relevant number of underlying securities in exchange for the depositary receipts, and to be provided with services in relation to the exercise of rights attached to the underlying securities by the RDR holder.

 

Advisers: equity offering

9. Outline the role of advisers used and main documents produced in an equity offering. Does it differ for an IPO?

The following advisers are usually involved in an equity offering procedure:

  • Lead managers.

  • Financial advisors.

  • Legal advisors.

The roles of the advisors in the course of an IPO and an SPO are generally the same.

Lead manager

The lead manager is an adviser chosen by the issuer to organise and co-ordinate the entire procedure of an equity offering. The main functions of the lead manager are the following:

  • Developing the project plan and structuring the equity offering.

  • Co-ordinating the equity offering procedure.

  • Assessing the business and financial conditions of the issuer.

  • Managing the process of drafting the prospectus and design marketing materials.

  • Communication with investors, exchanges, depositories, underwriters, the CBR and other government agencies.

  • Conducting roadshows.

  • Managing bookbuilding and placing the shares.

  • Providing market maker functions.

Financial advisor

The financial advisor is usually engaged to:

  • Develop or provide assistance in the development of the business plan and prospectus.

  • Provide assistance in the development of internal audit and control.

  • Prepare financial statements in accordance with International Financial Reporting Standards.

  • Provide assistance in the preparation of the budget and forecasts.

  • Provide comfort letters to the underwriters.

Legal advisor

Legal advisors are usually engaged for:

  • Drafting or legal expertise of documents relating to the equity offering.

  • Legal due diligence.

  • Issuance of legal opinions.

  • Providing legal assistance in the course of equity offering to the issuer or to the lead manager.

Documents

The following key documents are usually produced in the course of equity offering:

  • Decision on the increase of the issuer's share capital.

  • Decision on the additional issue of shares.

  • Prospectus.

  • Report on the results of the shares placement (notification of the results of the shares placement).

  • Corporate resolutions on approval of interested party transactions entered into as part of the shares placement (if applicable).

  • Subscription agreement between the issuer and investors (if applicable).

  • Underwriting agreement and deposit agreement (if applicable).

  • Comfort letters and legal opinions.

 

Equity prospectus/main offering document

10. When is a prospectus (or other main offering document) required? What are the main publication, regulatory filing or delivery requirements?

Prospectus (or other main offering document) required

The issue of shares must be accompanied by preparation and state registration of a prospectus, unless one of the following exceptions applies:

  • The shares are to be offered only to qualified investors, as long as there are fewer than 500 persons with a pre-emptive right to acquire such shares, excluding qualified investors.

  • The shares are to be offered to fewer than 500 shareholders of the issuer, excluding qualified investors.

  • The shares are to be offered to fewer than 150 persons, excluding qualified investors and shareholders of the issuer, and the number of shareholders, who are not qualified investors, does not exceed 500.

  • The shares are to be placed through closed subscription to fewer than 500 persons, excluding qualified investors.

  • The amount of funds attracted by the issuer through the placement of shares of one or more issues (additional issues) for one year does not exceed RUB200 million.

  • The amount to be paid by each of the potential investors, with the exception of persons exercising a pre-emptive right to purchase relevant shares, is over RUB4 million, as long as there are fewer than 500 persons with a pre-emptive right to acquire such shares, excluding qualified investors.

Main publication, regulatory filing or delivery requirements

The prospectus must be affirmed and signed by the auditor and appraiser (if shares are to be paid in kind), approved by the competent corporate body of the issuer and signed by the CEO and chief accountant of the issue. The prospectus must be registered by the CBR and published.

 
11. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document)?

The issue (and additional issue) of shares can be conducted without state registration and publishing of the prospectus in certain cases (see Question 10).

 
12. What are the main content or disclosure requirements for a prospectus (or other main offering document)? What main categories of information are included?

The prospectus must contain the following key information:

  • Information about the issuer and its financial and business operations.

  • Financial statements of the issuer, including:

    • audited annual financial statements for the last three years;

    • audited interim financial statements;

    • audited annual consolidated financial statements for the last three years; and

    • audited interim consolidated financial statements).

  • Information about the volume, timing, procedure for and conditions of the placement of the shares.

The financial statements can be prepared according to the Russian Financial Reporting Standards or International Financial Reporting Standards. In certain cases only International Financial Reporting Standards can be applied.

A working capital statement is also required.

 
13. How is the prospectus (or other main offering document) prepared? Who is responsible and/or may be liable for its contents?

Preparation of prospectus

Following Russian law and related business practice, the prospectus can be prepared by the issuer independently and/or by the issuer's financial advisor. External legal advisors are also quite often involved in the process of drafting the prospectus.

The prospectus must be signed by:

  • The person performing the functions of the sole executive body of the issuer.

  • The issuer's chief accountant (other person exercising his functions), confirming the reliability and completeness of any information contained in the prospectus.

  • A financial consultant on the securities market (at the issuer's sole discretion), confirming the accuracy and completeness of all information contained in the prospectus, except for the part confirmed by the auditor and/or appraiser (an affiliate of the issuer cannot act as the issuer's financial consultant).

The prospectus may also be signed by:

  • An auditor (audit organisation) confirming the accuracy of the information in his specified part of the prospectus.

  • An appraiser confirming the accuracy of the information in his specified parts of the prospectus.

  • A legal advisor and rating agency in the case of assignment to the issuer and/or a securities credit rating by a rating agency.

Responsibility and liability

The persons that signed the prospectus or who voted for approval of it bear joint and several vicarious liability for any losses caused to investors and/or owners of securities as a result of incorrect, incomplete, inaccurate and/or misleading information contained in the prospectus. This includes:

  • Criminal liability (Article 185, Criminal Code). The inclusion in a prospectus of deliberately unreliable information or the approval or confirmation of a prospectus or report on the results of a securities issue containing deliberately unreliable information, where such actions cause large-scale damage (more than RUB1 million) to citizens, organisations or the state, is punishable by:

    • fine of up to RUB300,000 or up to two years' wages;

    • compulsory work of up to 480 hours; or

    • correctional work of up to two years.

    The same crime committed by an organised group or resulting in severe damages or gain/avoidance of losses of more than RUB10 million is punishable by:

    • fine of up to RUB500,000 or up to two years' wages;

    • compulsory work of up to three years; or

    • imprisonment for up to three years.

  • Administrative liability (Article 15.17, Administrative Violations Code). A violation by the issuer of the securities issuing procedure where this action does not contain the criminal offence, is punishable by a fine of up to:

    • RUB30,000 for the issuer's officials.

    • RUB700,000 for legal entities.

 

Marketing equity offerings

14. How are offered equity securities marketed?

The marketing of equity offering can be by:

  • Publication of the prospectus.

  • Publication of research reports.

  • Disclosure of information on substantial facts in respect of the equity offering.

  • Marketing procedures such as investor roadshows and so on.

All marketing procedures must comply with the general requirements and restrictions of the Russian federal laws or regulations (see Question 15).

 
15. Outline any potential liability for publishing research reports by participating brokers/dealers and ways used to avoid such liability.

Russian laws do not contain any specific liability for brokers that publish research reports. However, these reports must comply with the restrictions stipulated in the Law on Advertising, which include, for example, that advertising of equity is prohibited before registration of a prospectus and must not promise any dividend payment and/or give any growth forecasts for the market value of the securities.

 

Bookbuilding

16. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with? How are orders confirmed?

Russian laws do not contain any specific regulations and/or requirements for bookbuilding. Bookbuilding is usually carried out by the organisers of the IPO process simultaneously with roadshows. The main purpose of bookbuilding is to identify potential investors and to determinate the price of the placed equity.

One of the ways of determining the range of investors is to carry out a retail offering. Any potential investor can participate in a retail offering if they have a brokerage account with a licensed broker.

 

Underwriting: equity offering

17. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee and/or commission?

The terms "underwriting", "underwriting agreement" and "underwriter" are not defined under Russian law. Usually, underwriting is structured based on one of two main principles:

  • Firm commitment principle. The underwriter must purchase an issue of securities of the issuer (in whole or in part) and resell them to the investors.

  • Best efforts principle. The underwriter acts as "agent" of the issuer and does not bear any risks that might be associated with the purchase of equity. The underwriter undertakes to use its best efforts for placement of issuer's equity and to place the maximum possible amount of equity without any warranty to repurchase equity that is not placed at its own expense.

The key terms of the underwriting agreement include:

  • The subject matter of the agreement.

  • The principle on which based the agreement, either firm commitment or best efforts.

  • The rights and obligations of the parties.

  • Representations and warranties in relation to, among other things:

    • the compliance of the equity issue procedure;

    • the financial status of the issuer;

    • there being no conflict of interest;

    • the validity of the agreement.

  • Fees and expenses of underwriter for the rendering services.

  • Conditions precedent provisions.

  • Warranties and compensation.

  • The liabilities of the parties.

  • The further obligations of the issuer and underwriter.

 

Timetable: equity offerings

18. What is the timetable for a typical equity offering? Does it differ for an IPO?

The approximate timetable for a typical equity offering (issue or additional issue) is as follows:

  • Taking of the corporate decision to increase charter capital, issue equity, issue the prospectus, or other decision for placement of equity: about two months, if approval from the shareholders' general meeting is not required.

  • Corporate approval of the decision: generally no delay, but must be no later than six months from the taking of the decision.

  • Preliminary examination of the documents necessary for state registration of the issue of equity by the CBR at the request of issuer: one month. Where state registration of the issue is accompanied by a prospectus, the registration authority must, on the issuer's request, carry out a preliminary review of the documents required for the state registration. However, the documents can be presented by the issuer's corporate bodies to the CBR without such approval. On preliminary review of the specified documents, the CBR must within 30 days decide on the compliance or non-compliance of the provided documents with the Russian laws and regulations.

  • State registration of an issue: one month. The CBR must carry out or to refuse the state registration of an issue of equity:

    • within 20 days; or

    • if the state registration was accompanied by the registration of the prospectus, within 30 days; or

    • if the documents were the subject to the CBR's preliminary review (by positive decision), within ten days from the date of receiving of the documents.

  • Equity placement: from one to five business days, up to no more than one year, from the placement commencement date. In case of delay, the maximum period must not exceed three years.

  • State registration of the report on the results of the equity issue (additional issue) or submission of a notification to the registration authority on the results of equity issue (additional issue): 30-45 days.

Within 30 days of the completion of equity placement, the issuer must file to the CBR the report on or notification of the results of the equity issue. The report or notification must be approved by the corporate bodies of the issuer before filing with the CBR.

The CBR must carry out or refuse the state registration of the report on the results of the equity issue (additional issue) within 14 days from the date of receiving the documents filed by the issuer.

Within a reasonable time after state registration, the issuer files documents to amend the charter connected with the size of the charter capital registered.

For an equity offering with a listing on MOEX, the whole process can take approximately four to six months or more, depending on specific circumstances.

The typical timetable for an IPO, additional/supplementary equity issue and secondary public offering are in principle the same.

 

Stabilisation

19. Are there rules on price stabilisation and market manipulation in connection with an equity offering?

There are no specific rules on price stabilisation and market manipulation in connection with an equity offering. General rules on combating illegal use of insider information and market manipulation are applied (see Question 24).

 

Tax: equity issues

20. What are the main tax issues when issuing and listing equity securities?

Tax questions concerning issue of shares

Generally, in an equity issue the major tax questions arise in relation to:

  • Tax on organisations' profits. The distribution of issued shares has no tax consequences for the taxpayer under the Tax Code. In addition, income from the distribution of shares of more than nominal value is not taken into account when determining the tax base.

    Certain expenses can also be recognised as expenses for the purposes of organisations' taxation, including the expenses associated with:

    • the organisation of an issue of securities;

    • the preparation of a prospectus;

    • the manufacture or acquisition of blank forms;

    • the registration of securities;

    • the servicing of securities, including expenses for the services of a registrar, depositary and payment agent in respect of interest/dividend payments;

    • the maintenance of a register;

    • the provision of information to shareholders in accordance with the legislation.

  • Value Added Tax. Under the Tax Code, the transfer of assets, where the transfer has the nature of an investment, is not subject to VAT. In addition, the transfer of ownership rights does not occur at the moment of the equity issue, since the shareholders become the primary owners of the shares and the company itself is only an issuer and has no right to distribute shares. Consequently, the issuing company has no VAT obligations in relation to a primary issue.

Dividends taxation

A company paying dividends must act on behalf of the taxpayer as a tax agent and withhold taxes on the dividends paid, remitting the corresponding amount to the Russian tax authorities.

However, since 1 January 2014, tax agents can become fiduciaries or depositaries for the issuing company. Fiduciaries are tax agents in relation to income that is paid to taxpayers (individuals and foreign organisations) on securities issued by Russian organisations for which related rights are recorded in the ledger account or depositary account of that fiduciary. The depositors act as a tax agent with respect to personal income tax in and with respect to the tax on profits paid by foreign organisations, in cases listed in the Tax Code.

The applicable tax rate on dividends depends on the status of the relevant taxpayer. The following tax rates are applicable for organisations:

  • 13% for income received in the form of dividends from Russian and foreign organisations by Russian organisations.

  • 15% for income received by a foreign organisation in the form of dividends on shares in Russian organisations and dividends from other forms of participation in the capital of an organisation.

  • 0% for income received by Russian organisations in the form of dividends provided that, as at adoption of the decision to pay dividends, the organisation receiving the dividends has continuously owned for not less than 365 calendar days a holding (share interest) of not less than 50% in the charter (pooled) capital (fund) of the organisation paying the dividends, or depositary receipts conferring the right to receive dividends in an amount equal to not less than 50 % of the total amount of dividends payable by the organisation.

The following tax rates are applicable for natural persons:

  • 13% for income received in the form of dividends by Russian tax residents from Russian and foreign companies.

  • 15% for income in a form of dividends paid by Russian organisations received by non-residents of the Russian Federation.

 

Continuing obligations

21. What are the main areas of continuing obligations applicable to listed companies and the legislation that applies?

The regulation of continuing obligations includes federal legislation, acts of the CBR and MOEX rules.

An issuer must fulfil the following disclosure obligations:

  • Quarterly financial statements. Issued by the company's CEO and senior accountant and published on the internet within 45 days from the end of the quarter.

  • Consolidated financial statements. Annual and interlocutory statements are made in accordance with International Financial Reporting Standards, subject to mandatory audit and published on the Internet no later than 120 days from the end of the year (for annual statements) or no later than in 60 days from the end of the 2nd quarter (for interlocutory statements).

  • Information on material facts influencing securities costs. This includes information on shareholders meetings and decisions, board of directors meetings and decisions, company control by the issuer, liquidation or reorganisation decisions, significant transactions and so on. Such information must be published no later than within two days in the internet or no later than one day on the newsline.

  • Articles of association and bye-laws of a public JSC. These regulate the company's governance bodies.

  • Information on acquisition of more than 20% of voting shares of another JSC.

  • Information on affiliated entities.

An issuer must maintain a certain organisational structure and have specific policies. In order to include shares in the first level quotation list on MOEX there must be a:

  • Board of directors consisting of at least three independent directors.

  • Audit committee headed by an independent director and consisting only or mainly of independent directors.

  • Remuneration committee consisting only or mainly of independent directors.

  • Committee on nominations consisting only or mainly of independent directors.

  • officer or a structural subdivision to perform the functions of the corporate secretary.

  • Internal audit body.

  • Issuer's dividend policy.

  • Internal audit policy.

To include shares into the second level quotation list on MOEX, in comparison with the requirements for the first level:

  • The issuer is not obliged to establish a remuneration committee, nomination committee, have a corporate secretary and execute dividend policy.

  • The board of directors must have at least two independent directors.

  • The issuer's charter must include a provision stating that a notice of an annual general shareholders' meeting shall be given not less than 30 days before the meeting.

  • The issuer's charter or an internal document approved by the general shareholders' meeting must contain a provision stating that information on the date of record for those entitled to participate in the meeting was disclosed at least five days before that date.

 
22. Do the continuing obligations apply to listed foreign companies and to issuers of depositary receipts?

Continuing obligations apply to listed foreign companies with the following differences:

  • Financial statements must be made according to International Financial Reporting Standards and the annual report must contain a foreign audit report (an auditor who is entitled to make such a report in accordance with foreign legislation) or Russian audit report.

  • If securities were listed on a foreign exchange (included in the CBR foreign exchange list), information must be disclosed to the extent it is disclosed on a foreign exchange.

RDR issuers must perform continuing obligations under Russian law with the following differences:

  • Financial statements must be made according to International Financial Reporting Standards and the annual report must include the foreign audit report or Russian audit report.

  • If securities were listed on a foreign exchange and the issuer assumes no obligations to the owners of RDRs, the RDR's issuer must disclose information to the extent it is disclosed by the foreign investors on a foreign exchange.

 
23. What are the penalties for breaching the continuing obligations?

MOEX can exclude (de-list or suspend) securities from the quotation list. Breach of the continuing obligations is subject to:

  • Criminal liability (Article 185.1, Criminal Code). Fraudulent evasion of information disclosure or disclosure of knowingly false or incomplete information, if such actions caused large-scale damage (more than RUB1,000,000), is subject to:

    • a fine of up to RUB300,000 or up to two years' wages;

    • compulsory work of up to 480 hours; or

    • correctional work of up to two years.

  • Administrative liability (Article 15.17, Administrative Violations Code). Non-disclosure or breach of requirements regarding procedure and terms of disclosure, as well as disclosure of false or incomplete information, is subject to:

    • a fine of up to RUB50,000 or disqualification for up to two years for officials:

    • a fine of up to RUB1 million for legal entities.

 

Market abuse and insider dealing

24. What are the restrictions on market abuse and insider dealing?

Restrictions on market abuse/insider dealing

The special law concerning restrictions on market abuse and insider dealing was adopted on July 2010 (Insider Law). The Insider Law:

  • Defines "insider", "insider information" and "market manipulation".

  • Implements requirements for managing insiders.

  • Determines the powers and responsibilities of the CBR as the controlling authority.

  • Establishes criminal and administrative liability.

Under the Insider Law, "market abuse" is defined as price manipulation on the market, including among other things:

  • The dissemination of false information through mass media and the internet.

  • Transactions where the same person is beneficiary on both sides.

  • Using buy and sell orders for or on behalf of the same person.

  • Sham transactions.

  • Bids made or issued without any intention of execution.

"Insider information" is any accurate and specific information of any kind that has not been made public and that could have a material effect on the prices of the financial instruments, foreign currency and/or goods.

Penalties for market abuse/insider dealing

Criminal liability. Article 185.3 and Article 185.6 of the Criminal Code includes penalties for:

  • Market manipulation:

    • a fine of up to RUB 500,000 or up to three years' wages; or

    • a maximum of four-years' imprisonment and potentially either a fine of up to RUB50,000 (or up to three month's wages) or a prohibition on holding certain positions for up to three years.

  • Market manipulation by an organised group or resulting in severe damages or gains/avoidance of losses (of more than RUB10 million):

    • a fine of up to RUB1 million or up to five years' wages; or

    • a maximum of seven-years' imprisonment and potentially a fine of up to RUB100,000 (or up to two years' wages) or a prohibition on holding certain positions for up to five years.

  • Use of inside information:

    • a fine of up to RUB500,000 fine or up to three years' wage; or

    • a maximum of four years' imprisonment and potentially a fine of up to RUB50,000 (or up to three months' wages) or a prohibition on holding certain positions for up to three years.

  • Illegal transfer of inside information:

    • a fine up to RUB1 million or up to four years' wages; or

    • a maximum of six years' imprisonment and potentially a fine of up to RUB100,000 (or up to two years' wages) or a prohibition on holding certain positions for up to four years.

Administrative liability. Article 15.21 and Article 15.30 of the Administrative Violations Code provide for administrative penalties:

  • Individuals: a fine of up to RUB5,000.

  • Officials: a fine of up to RUB50,000 or disqualification for up to two years.

  • Legal entities: a fine in the amount of the extra gain or avoided losses but no less than RUB700,000.

 

De-listing

25. When can a company be de-listed?

De-listing

De-listing may be performed either voluntarily on submission of an application by the issuer, or mandatorily by MOEX. Shares can be delisted on the following grounds:

  • The securities issuance becoming void or invalid.

  • Annulment of the securities issue.

  • Issuer's re-organisation or liquidation.

  • Cancellation of state registration of the securities issue.

  • Instruction of a government authority.

  • Court order, bailiff's writ of execution or another enforcement document.

  • Early redemption of the securities issue.

  • Securities conversion with simultaneous cancellation by the registrar.

  • Exclusion of securities from the clearing list.

  • Termination of operating securities by a depository.

  • Annulment of the individual number of the securities additional issue.

  • Court decision invalidating MOEX's decision on the inclusion in the securities list of a foreign issuer or the CBR's on the admission of a foreign issuer's securities to public trading.

  • De-listing of a foreign issuer's securities on all foreign exchanges included into the list of approved foreign exchanges and exclusion of such exchanges from the list.

  • Any changes of issue terms, Russian or foreign legislation, due to which securities can no longer be publically offered.

  • Termination of the listing agreement (based on de-listing decision).

  • The issuer's bankruptcy.

  • Other grounds.

Shares can be de-listed by MOEX on the following grounds:

  • Non-compliance with securities market laws and/or with MOEX listing rules, and the impossibility of rectifying or failure to rectify a breach of securities market laws.

  • Bankruptcy procedure (excluding competition management).

  • Non-fulfilment of the issuer's financial obligations under the listing agreement

  • A decision by the CBR releasing the issuer from the obligation to disclose information.

  • Recommendations from the MOEX's committees.

  • Unreliable and incomplete information in the securities prospectus of a foreign issuer.

  • Maturity of the securities.

  • Breach of disclosure obligations.

  • Other grounds.

During 2014-2015 there were a few announcements on de-listing, for example that made by PAO "Mosenregosbyt", the biggest energy supplier in Moscow.

Suspensions

MOEX can suspend securities listing in all the situations above. In addition, the following may result in suspension:

  • Instruction of the government authority on trading suspension.

  • Court order, bailiff's writ of execution or another enforcement document on suspension.

  • Non-compliance with listing rules (listing documents).

  • Recommendations from the MOEX's committees on suspension of securities trading.

  • Other substantial events that may affect the trading of the securities.

 

Reform

26. Are there any proposals for reform of equity capital markets/exchanges? Are these proposals likely to come into force and, if so, when?

In October 2015, the CBR proposed updated requirements for the admission of securities to public offering and listing, and looked at the regulations' current provisions on the procedure for this.

 

Online resources

Official Legislation

W http://pravo.gov.ru ( www.practicallaw.com/9-555-2708)

Description. Main portal containing information about new legislation. Laws and rules are available in Russian only.

The Central Bank of the Russian Federation (CBR)

W www.cbr.ru

Description. Official website of the main regulatory body for the equity market. Both Russian and English versions of the site contain topical issues.

Moscow Exchange (MOEX)

W http://moex.com

Description. Official website of MOEX. Both Russian and English versions of the site contain topical issues related to the exchange.

Moscow International Financial Centre

W http://mfc-moscow.com/index.php?id=41 ( www.practicallaw.com/0-573-6547)

Description. Web resource of current and key information regarding the Russian financial markets.

National Association of Securities Market Participants (NAUFOR)

W www.naufor.ru

Description. NAUFOR is a statutory self-regulatory organisation with wide responsibilities in regulation, supervision and enforcement of over 320 member-firms including broker-dealers, investment banks, commercial banks, custodians and other companies from the securities industry. The English version of the website is less informative.



Contributor profiles

Evgeny Zhilin, Managing Partner

YUST Law Firm

T +7 495 795 08 43
F +7 499 241 19 48
E zhilin@yust.ru
W www.yust.ru

Professional qualifications. Russian Federation, attorney-at-law

Areas of practice. Corporate law and M&A, capital markets, competition and anti-trust, contract law, international arbitration, real estate/development/land law, legal regulation of foreign investments, environmental law, insurance.

Languages. Russian, English and German.

Professional associations/memberships. The expert of the Russian-German law Institute. Member of the Non-Commercial Partnership "Assistance to Competition development".

Roman Cherlenyak, Head of Corporate and Commercial

YUST Law Firm

T +7 495 795 08 43
F +7 499 241 19 48
E cherlenyak@yust.ru
W www.yust.ru

Professional qualifications. Russian Federation, Doctor of Law

Areas of practice. Corporate law and M&A, capital markets, public-private partnerships, environmental law.

Languages. Russian and English.

Maxim Mezentsev, Senior Associate

YUST Law Firm

T +7 495 795 08 43
F +7 499 241 19 48
E mezentsev@yust.ru
W www.yust.ru

Professional qualifications. Russian Federation, LLM

Areas of practice. Corporate law and M&A, capital markets, contract law, legal regulation of foreign investments, competition and anti-trust, international arbitration.

Languages. Russian, English and German.


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