Updated June 2, 2008

   Federal Financial Markets Service (FFMS) prepares amendments to an act about joint-stock comp anies obligating the Russian companies to expose the real owners.

In experts' opinion, new requirement efficiency will depend on rigidity of control mechanisms over its fulfillment. If provision of an act is unclear, there will not be transparent companies at the Russian market.

   Vice-prime minister Alexander Zhukov reported that in the nearest future in the Russian legislation would appear a requirement about the obligatory exposure of the real companies' stockholders who own stocks both directly and by means of some other companies.

FFMS is currently working on the corresponding amendments to an act about joint-s

tock companies. According to vice-prime minister, an analogical requirement to companies has already existed in legislation of many countries. "Concerning Russia we find out about actual companies' owners only by means of foreign stock exchanges information", declared Mr. Zubkov.

   When FFMS had offered amendments to an act, it was operating within the concept framework of securities market development for 2008-2012 and long-term prospect announced by department head Vladimir Milovidov in March. Except for the set FFMS tasks, "more detailed exposure of ownership structure of the Russian joint-stock companies, information about people being target beneficial owners of company stocks foremost" is indicated in the document. Now the Russian legislation strictly regulates information exposure about actual beneficiaries regarding banks only.

They have to exposure data about owners

to Bank of Russia to participate in the deposit insurance system. Requirements about exposure of other legal entities' owners are fixed in FFMS regulations and reach issuers of securities only.

They expose information about owners in notifications about the results of securities issue and quarterly issuers' reports. However, nominee holders of securities are often indicated as owners.

   In FFMS refused to comment how the department was going to control new requirement implementation by companies. "Unlike Bank of Russia that controls information exposure about banks' owners listed in the deposit insurance system by means of compulsory licensing mechanism, FFMS does not have such opportunities", says an advocate of St.

Petersburg City Advocates' Chamber Arthur Leontev. "However, the Service can require exposing actual owners within registration of emission prospectus". Vladimir Milovidov department did not also say concerning what joint-stock companies (close or open) would be introduced a requirement about obligatory exposure of target beneficiaries.

"Listed companies may have more than a million of private stockholders", is puzzled UTair Airline director general Andrey Martirosov.

    If these questions are not considered in the legislation in details, new regulation will not run, as experts warn.

"Company owners are not interested in external control over their business structure, by tax institutions in particular", specifies the managing partner of Independent Directors managing company Andrey Severilov. One of the ways to avoid implementation

of an act requirement is using trusts, funds and holdings. "A real company owner becomes almost invisible within transfer of assets management rights to a trust", says the Moscow office director of the audit and consulting company Tax Consulting U.K. Edward Savulyak. "Managing company will manage stocks of fund stakeholders, and it can list tens or even thousands".

   However, large companies will probably agree to expose information about beneficiaries, as analysts consider. "At the moment absolute majority of companies expose their target beneficiaries when enter the bonds market", says MDM-Bank analyst Mikhail Galkin.

"Issuers understand that therefore they will not be able to place a loan or they have to pay a bonus for a risk related to non-transparency". In Andrey Martirosov opinion, a company itself can suffer from lack of information exposure.

"The best assessor is an investor that votes by means of a wallet".