ST 185.6 of the Criminal Code of the Russian Federation.
1. Intentional use of insider information for carrying out transactions with financial instruments, foreign currency and (or) goods to which such information relates, at one’s own expense or at the expense of a third party, as well as intentional use of insider information by giving recommendations to third parties, obliging or inducing them in any other way to purchase or sell financial instruments, foreign currency and (or) goods, if such use has caused large damage to citizens, organizations or the state or is associated with generating income or avoiding losses on a large scale -
shall be punishable by a fine in the amount of three hundred thousand to five hundred thousand rubles, or in the amount of the wages or other income of the convicted person for a period of one to three years, or by forced labor for a term of up to four years, with deprivation of the right to hold certain positions or engage in certain activities for a term of up to three years or without it, or imprisonment for a term of two to four years with a fine in the amount of up to fifty thousand rubles or in the amount of wages or other income of the convicted person for a period of up to three months, or without it with deprivation of the right to hold certain positions or engage in certain activities activities for a period of up to three years or without it.
2. Intentional use of insider information by unlawfully transferring it to another person, if such an act entailed the consequences provided for in part one of this article, -
shall be punishable by a fine in the amount of five hundred thousand rubles to one million rubles, or in the amount of the wages or other income of the convicted person for a period of two to four years, or by forced labor for a term of up to four years, with deprivation of the right to hold certain positions or engage in certain activities for a term of up to four years or without it, or imprisonment for a term of two to six years with a fine in the amount of up to one hundred thousand rubles or in the amount of wages or other income of the convicted person for a period of up to two years, or without it with deprivation of the right to hold certain positions or engage in certain activities activities for a period of up to four years or without it.
Note. In this article, major damage, income, and losses on a large scale are recognized as damage, income, and losses in an amount exceeding three million seven hundred fifty thousand rubles.
What is insider
In Russia, there is Federal Law No. 224-FZ dated July 27, 2010 “On combating the misuse of insider information and market manipulation” (hereinafter referred to as Law No. 224-FZ).
According to it, insider information is accurate and specific information that has not been disseminated (including commercial, official, bank secrets, communication secrets (regarding information about postal money transfers) and other secrets protected by law) and the dissemination of which may have a significant impact on the prices of financial instruments, foreign currency and/or goods (including information relating to one or more issuers of securities, one or more management companies of investment funds, mutual funds and non-state pension funds or one or more financial instruments, foreign currency and/or goods.
Part 1 art.
3 of Law No. 224-FZ obliges some legal entities, taking into account the specifics of their activities, to compile their own lists of insider information, which are approved by the head. This includes:
- companies issuing securities (issuers);
- management companies (MC);
- professional participants in the securities market and other persons carrying out transactions with financial instruments, foreign currency and/or goods in the interests of clients who have received insider information from clients (brokers, traders, etc.)
Moreover, your list must also include insider information, the list of which is approved by a regulatory act of the Bank of Russia. And this is his Directive No. 5326-U dated November 21, 2019, as amended as of April 1, 2021. Changes were made by another Central Bank Directive No. 5719-U dated 02.02.2021.
At the same time, the previous list, enshrined in the Directive of the Bank of Russia dated September 11, 2014 No. 3379-U, becomes invalid.
The document also establishes the procedure and timing for disclosing each insider information. Accordingly, from April 1, 2021, there is no need to apply the order of the Federal Financial Markets Service of Russia dated February 28, 2012 No. 12-9/pz-n, which regulated similar issues.
Law establishing provisions governing insider trading and market manipulation:
Federal Law of July 27, 2010 No. 224-FZ “On combating the misuse of insider information and market manipulation and on introducing amendments to certain legislative acts of the Russian Federation”
The Central Bank of the Russian Federation (Bank of Russia) exercises control over compliance with the requirements of the legislation of the Russian Federation on combating the misuse of insider information and market manipulation in accordance with clause 18.3 of Art. 4 of the Federal Law of July 10, 2002 No. 86-FZ “On the Central Bank of the Russian Federation (Bank of Russia)”)
Regulatory acts of the Bank of Russia in accordance with Federal Law dated July 27, 2010 No. 224-FZ:
Directive of the Bank of Russia dated April 22, 2019 No. 5130-U “On the procedure for sending to the Bank of Russia by insiders a notification containing insider information that is not disclosed”
Directive of the Bank of Russia dated April 22, 2019 No. 5129-U “On the procedure for transfer by legal entities specified in paragraphs 1, 3 - 7, 11 and 12 of Article 4 of Federal Law dated July 27, 2010 No. 224-FZ “On combating the misuse of insider information” and market manipulation and on introducing amendments to certain legislative acts of the Russian Federation", the organizer of trade through which transactions with financial instruments, foreign currency and (or) goods are carried out, at his request, a list of insiders"
Directive of the Bank of Russia dated April 22, 2019 No. 5128-U (as amended on November 16, 2020) “On the procedure and timing for providing information by insiders who have received the provisions provided for in parts 1-3 of Article 10 of the Federal Law dated July 27, 2010 No. 224-FZ “On Counteracting unlawful use of insider information and market manipulation and amendments to certain legislative acts of the Russian Federation" request"
Directive of the Bank of Russia dated November 21, 2019 N 5326-U (as amended on February 2, 2021) “On the list of insider information of legal entities specified in paragraphs 1, 3, 4, 11 and 12 of Article 4 of the Federal Law of July 27, 2010 N 224 -FZ “On combating the misuse of insider information and market manipulation and on introducing amendments to certain legislative acts of the Russian Federation”, as well as on the procedure and timing for its disclosure”
Order of the Federal Financial Markets Service of Russia dated June 18, 2013 No. 13-51/pz-On approval of the Regulations on the procedure for notifying persons about their inclusion in the list of insiders and exclusion from such a list, Regulations on the procedure for transferring lists of insiders to trade organizers through which transactions with financial instruments, foreign currency and (or) goods, Regulations on the procedure and timing for sending notifications by insiders about transactions they have performed"
Methodological recommendations of the Bank of Russia
in accordance with Federal Law dated July 27, 2010 No. 224-FZ:
Methodological recommendations of the Bank of Russia dated September 14, 2018 No. 23-MR “On the development and approval of the procedure for access to insider information and rules for protecting its confidentiality”
Responsibility for misuse of insider information and market manipulation:
The Criminal Code of the Russian Federation establishes the following criminal offenses:
Article 185.3. Market manipulation
Article 185.6. Illegal use of insider information
The Code of the Russian Federation on Administrative Offenses establishes the following elements of administrative offenses (these elements are applied if the actions of the guilty person do not contain a criminal offense):
Article 15.21. Illegal use of insider information
Article 15.30. Market manipulation
Article 15.35. Violation of legal requirements on combating the misuse of insider information and market manipulation
What changes are there in the list of inside information?
Here are the main changes for issuers of equity securities admitted to organized trading.
As of April 1, 2021, the Central Bank clarified which decisions of the board of directors relate to insider information. These are, in particular, the following solutions:
- elect (including re-elect) the chairman of the board of directors;
- determine the placement price of shares at organized auctions;
- set the share repurchase price;
- recommend the amount of dividends (on shares) and the procedure for their payment;
- agree to make a big deal.
But information that the issuer has sent an application to make entries in the Unified State Register of Legal Entities in connection with its reorganization, termination of activities or liquidation is no longer considered insider information.
Commentary to Art. 185.6 Criminal Code
1. A socially dangerous act is characterized by the unlawful use of insider information.
2. Alternatively, a mandatory feature is the method of committing the crime - by giving recommendations to third parties, obliging or otherwise inducing them to purchase or sell financial instruments, foreign currency and (or) goods.
3. Criminal liability occurs if such use has caused major damage to citizens, organizations or the state or is associated with the extraction of income or the avoidance of losses on a large scale (see notes to this article and to Article 185.3 of the Criminal Code).
4. The subjective side is characterized by an intentional form of guilt. If the unlawful use of insider information is carried out in a manner not provided for in Part 1 of Art. 185.6 of the Criminal Code, then liability will arise if the act is committed for the purpose of carrying out transactions with financial instruments, foreign currency and (or) goods to which such information relates, at one’s own expense or at the expense of a third party.
5. The subject of the crime is a special one - an insider.
6. A qualifying method of committing a crime is its unlawful transfer to another person.
Insider information from a legal point of view
The material was prepared using legal acts as of November 15, 2015.
Today, in the business environment, the use of the term “this is inside” is quite common, as a designation of certain business information with a limited range of access to it. At the same time, the established terminology does not always coincide with the “official” interpretation of the law, and it does not always imply seemingly obvious things.
Russian law contains a definition of “insider information” that is quite voluminous and structurally difficult to initially understand. In addition, a significant legal difference between insider information and other information protected by law (for example, from state secrets, the classification of information to which is carried out by classifying it on the grounds and in the manner prescribed by law) is the presence in it of a number of mandatory criteria (features), as well as the need to undergo a two-stage procedure for its recognition as such.
In a conditionally abbreviated form, insider information in accordance with Russian legislation is
accurate and specific information that has not been disseminated or provided (1), the dissemination or provision of which could have a significant impact on the prices of financial instruments, foreign currencies and (or) commodities (2), and which relates to information included in the relevant insider list information (3).
Each conventionally designated paragraph (1, 2, 3) of the above definition is subject to additional interpretation.
I
We assume that the criteria of “accuracy” and “specificity” do not require additional disclosure, and possible discrepancies in their understanding are a field for resolving individual legal disputes. Accurate and specific information may include , inter alia, information constituting commercial, official, banking secrets, communications secrets (but only in terms of information about postal money transfers) and other secrets protected by law.
In accordance with the provisions of Article 8 of Federal Law No. 224-FZ dated July 27, 2010, insider information is subject to disclosure or provision in the manner and within the time limits established by Bank of Russia regulations. As a rule, the period for disclosing or providing insider information in order to provide access to it is carried out in the news feed and the Internet within a period of 1 to 3 days, and this in turn means that the fact of disclosure of information “automatically” deprives it insider status.
II
The second conditional sign means that insider information must have a significant impact on the prices of financial instruments, etc. , including those relating to:
- one or more issuers of issue-grade securities,
- one or more management companies of investment funds, mutual funds and non-state pension funds,
- one or more business entities included in the register provided for by the Federal Law “On the Protection of Competition” and occupying a dominant position in the market for a certain product within the geographical boundaries of the Russian Federation,
- one or more financial instruments, foreign currencies and/or commodities.
Materiality in this case is a subjective, evaluative criterion, which is determined by the economic laws of the stock market. In non-obvious cases, recognition of material information can be carried out on the basis of an analysis of statistics on the disclosure of similar insider information and the economic consequences of its disclosure.
III
The third conditional sign presupposes the mandatory inclusion of insider information in the relevant list. The list of insider information is established by law separately for two conditional groups of insiders.
— For federal executive authorities, — executive state authorities of constituent entities of the Russian Federation, — local government bodies, — management bodies of state extra-budgetary funds (hereinafter referred to as the “insider — government body”), — the Bank of Russia, the law includes in the list of insider information:
- information on decisions made by insiders - government authorities on the results of trades/tenders;
- information received by them during the inspections, as well as information on the results of such inspections;
- information about decisions taken by insiders – government bodies to issue, suspend or cancel (revoke) licenses (permits, accreditations) of other insiders to carry out certain types of activities, as well as other permits;
- information on the decisions they made to bring other insiders to administrative responsibility, as well as on the application of other sanctions to them;
- other insider information determined by regulatory acts of the authorities.
It is important to note that the named information will receive insider status only if the insider - a government body, acting in accordance with the methodological recommendations of the Bank of Russia, approves its own regulatory act containing a personal exhaustive list of insider information. The approved list of insiders - government bodies must be disclosed on the Internet and on their official website. Failure to comply with this procedure entails a legal refusal to recognize the status of insider information.
— For the second group of insiders, which includes: — issuers and management companies; — economic entities occupying a dominant position in the market; — trade organizers, clearing organizations, as well as depositories and credit organizations that carry out settlements based on the results of transactions made through trade organizers; - professional participants in the securities market, - information agencies, - rating agencies, an exhaustive list of insider information is determined by a regulatory act of the Bank of Russia. Please note that specific information will receive the status of “insider” only if it is included in the personal list approved by the local act of the insider himself.
Thus, the law presupposes a two-stage system for including information in the list of insider information: government authorities must determine the possibility of including certain information in the list of insider information, and the insider himself is obliged to take legal measures to protect information by adopting a local act.
Analyzing the above, by virtue of the requirements of the law, insider information is considered to be:
- precise and specific,
- not distributed or presented,
— having a significant impact on the prices of financial instruments, foreign currency and/or goods,
— is simultaneously included in the legally regulated and local insider list.
The absence of any mandatory feature does not allow the information to be recognized as insider information.
Lawyer Pavel Domkin
