New Law on Insider Trading and Market Manipulation in Russia

The new federal law "On Counteracting the Illegitimate Use of Insider Information and Market Manipulation and on Amendments to Certain Laws of the Russian Federation," dated July 27"', 2010 (hereinafter referred to as the "Law") comes into effect on January 27th, 2011.
This Law consists of partly from western legislations, including E.U. directives and U.S. Securities and Exchange Commission rules and regulations. It establishes regulation on the use of insider information and market manipulation, when trading m financial instruments, foreign currencies, commodities.
The Law provides certain provisions as follows:
 definitions of "insider information" and "insider";
 prohibition of use of insider information;
 disclosure and reporting requirements;
 actions constituting market manipulation; and
 liability for non compliance with the Law,
What is very important here that the Law defines the term "insider information" as "any precise and specific non-public information, the disclosure of which may significantly affect the price of a particular financial instrument, foreign currency and/or commodity. But this term does not include any information that becomes public through required or permitted disclosures, research, forecasts and other analytical reports based on public information, and recommendations or proposals on transactions involving financial instruments, foreign currencies and/or commodities.'
The Law sets out two categories of "insiders": "primary insider" and "secondary insider.'" A primary insider is considered to be any of the following persons;
(i) issuer of securities;

(ii) asset management company;

(iii) company having a dominant market position and included in the state register, as is maintained by the Russian Federal Antimonopoly Services;

(iv) broker and other professional participant in the securities market;

(v) stock exchange, clearing, depositary or credit organization that conducts transaction settlements on the stock exchange market;

(vi) shareholder controlling at least 25% of the governing body of any entity listed in (i) to (v) above;

(vii) director, executive officer and auditor of any person listed in items (i) to (vi) above; and information and rating agencies.

A secondary insider is considered to be a person who got the insider information:
(i) from a primary insider or other persons;

(ii) accidentally, but as a result of lawful actions by such secondary insider; or

(iii) as a result of any breach of law.

The Law requires issuers, asset management companies and certain other market participants to disclose insider information/ subject to limited exceptions. The Federal law "On Securities Market" already requires issuers to disclose such information by reporting on 'key events'. The Law authorizes the FSFM to promulgate the rules and procedures for such disclosure by asset management companies and other market participants.
The Law also establishes a detailed list of actions constituting "market manipulation," as a result of which a substantial deviation in price, supply, demand or volume of trading in the relevant financial instruments occurs. The market manipulation activities include, among other activities, the following:
 deliberate distribution of false information via a publicly available source, including electronic mass media and the Internet;

 entering into a transaction, where the ultimate beneficiary on both sides of such transaction is the same person;

 submission of buy and sell orders for, or on behalf of, the same person, where the price of the buy order is equal to or greater than the price of the sell order; and

 performing multiple transactions within one trading day on the account of, or for the benefit of, the same person with the purpose of misleading other market participants.