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New market manipulation laws strike at business media

Politicians, journalists and market analysts could now be jailed if their words drive stock markets up or down, after Russia’s State Duma passed a bill to tackle market manipulation.

The minimum fine – 2 thousand dollars. The maximum sentence – seven years in jail.

The new law will protect investors and punish those tampering with shareholder rights and manipulating share prices – including through the media and the Internet. Aleksandr Chernishev, Senior Associate at Vegas Lex says the implications of the law are potentially very significant, and believes that application of it could be inconsistent.

“Last year at the peak of the crisis every statement of our Finance Minister Kudrin drove the market up and down. These kinds of statements could also be the basis for charges. In our legislation only the President has immunity, but there are risks that the authorities will be selective in prosecution.”

Lawyers say that the definitions in the new law are vague and many have a double meaning. Some Russian business dailies are already complaining about traders refusing to comment for them on the markets.

Dmitry Serebrennikov, Deputy Director of the brokerage Finam, says that although their experts will work with the press as they did before the law, and the company will not stop publishing the rumors column on its website, the new law is in part aimed at his industry.

“This law will mostly affect investment banking. Those holding or buying big stakes should be careful.”

He says Russia’s Financial Market Service wants to improve regulation of the stock market in a bid to make Moscow an international financial center. However, Serebrennikov adds, price manipulations are not the main problem in the financial sector.

“There are other burning problems – investors suffer from inadequate tax reporting on stock market operations, and investors pay fees for transferring shares from one clearinghouse depository to another.”

Market regulators say the new law will modernize Russian legislation to meet Western standards. In the UK a conviction for price manipulation may lead to 7 years in jail. But experts say – even in Britain, only a handful of dodgy trades from thousands ever make it in to court.