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Corporate law and governance, financial transaction taxes

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Financial infrastructure and financial market regulation


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FFMS Considers 6 Months Grace Period on Capital Decrease Fines

05.07.2012 18:35 / Interfax

The Federal Financial Markets Service (FFMS) is considering the possibility of a 6-month grace period on capital decrease fine for licensed stock market and mutual investment market participants.

According to Head of National Stock Market Participants Association (NAUFOR) Alexey Timofeev, who spoke at “Securities Market Infrastructure: Sustained Development Today” conference on Thursday, this concept was supported by FFMS at the Capital Workgroup debate with several SROs.

“We are discussing approaches to capital requirements, including this issue”, FFMS Deputy Head Sergey Kharlamov told the press.

According to him, the proposed mechanism will allow market participants to stay afloat. “For us, capital decrease will be a sign that the company must be closely watched. A licensed participant in financial trouble should not be automatically banished from the market”, said Kharlamov.

Timofeev said that today, capital decrease may lead to the FFMS issuing a 700 thousand rouble fine for the company, further complicating recovery.

He thinks that if a company fails to meet the required minimum, FFMS must request a recovery plan and follow it through. “For brokers, dealers 6 months will be acceptable, for fu8nd managers and registrars it could be longer, maybe a year”, said Timofeev.

As reported earlier, the workgroup arrived at a conclusion that own capital should allow the licensed participant to remain in business for a certain while, paying salaries and rent, communication bills and meeting operational costs. Own capital must not be used for client liability and covering other operational risks, these should be covered by prudential limits.

Timofeev stated that a meeting of the Presidential Financial Markets Development Council is set for 10 July to formulate priorities for the remainder of the year. “It is possible that the agenda will include prudential oversight”, he said.

Project Group №1Sergei KharlamovAlexey Timofeev