MOSCOW, Dec 1 (Reuters) - Russia will roll out laws next year to restrict insider trading and create a compensation fund for victims of investment fraud, the head of Russia's financial markets watchdog said on Monday.
Brokerages and investment funds will contribute to the compensation fund, which will be similar to the banking sector's deposit insurance scheme, said Vladimir Milovidov, the head of the Federal Financial Markets Service. "In case these market participants break Russian laws and cause their clients to suffer a (financial) loss, then the compensation fund will compensate those citizen for those losses, " he told a press briefing.
Milovidov was clarifying statements made earlier on Monday by Prime Minister Vladimir Putin, who along with other top officials has sought in recent weeks to bolster public confidence in Russia's financial markets and its currency.
Russia's stock market has sunk 70 percent since May highs, dragged down by the global credit crisis. "A system of compensation must be formed to guarantee that losses sustained by citizens from the malicious actions of market participants be returned," Putin said. Milovidov said a set of laws on the compensation fund will be drafted by July 1, 2009.
Losses suffered due to stock market volatility or falling stock prices will not be compensated, he added. "Unfortunately no one is insured against the movements of the market
." INSIDER TRADING LAWS Investors and regulators have long complained that Russia's financial system does not have an adequate legal foundation, largely because less than two decades have passed since the birth of the local stock market.
Milovidov's service has lobbied for years to push through laws on insider trading and various types of securities fraud, which it says are not defined precisely under Russian law. On Monday, the government finally approved a set of laws on insider trading that would hold investors responsible for manipulating stock values. "We are talking about a legal framework...that would define insider trading, manipulation, and assign punishments,
" Milovidov said, adding that the laws would soon be presented for approval to the State Duma, Russia's lower house of parliament. It took regulators and lawmakers almost two years to draft the legislation and several additional years to gain government approval.
(Reporting by Anton Doroshev; Writing by Simon Shuster; Editing by Jon Loades-Carter) Keywords: FINANCIAL CRIME
