Protection of Investors: New Challenges for the Disclosure of Information in the Securities Market in Russia

Abstract

The disproportion of information in the stock market creates conditions for unlawful use of insider information, which, in turn, produces a negative impact on the stock market, investment conditions in the country and the economy as a whole. In Russia the institute of disclosure in the securities market does not secure provision of investor rights to obtain quality information on the issuer of securities, its group of entities, its financial conditions, as well as other important aspects, which are of principal significance for the issuer and its affiliated parties. Information disclosed by the issuer is not reliable for investors. Only a few pay attention to the disclosure of information, such information is not analysed and is hardly monitored by the regulator with regard to the obligation to report it. Issuers have no incentives to disclose information, as mechanisms of liability are ineffective. This institution in Russia does not mitigate the disproportion of information between insiders and outsiders. It leads to considerable costs for the issuers, while the level of investor protection is not increased. The rights of investors in the securities market are not protected. The whole system of the disclosure of information requires reasonable and systematic restructuring.An obligation for issuers to disclose information in good faith should be stipulated. It is necessary to abandon the attempt to foresee in legislation all possible important events, the details of which can affect investment decisions. Disclosure should be timely, correct, reliable, consistent, concise, and free from irrelevant information.A reconsideration of the system of liability for unfair disclosure is required. The CEO of the issuer shall be liable for proper disclosure. It is reasonable to consider the burden of proof of good-faith disclosure on the CEO.It is important to change the approaches to the administrative liability of the issuer (in violation of the rules of the disclosing of information fault must be presumed, lack of fault must be proved by the issuer; the statute of limitations for imposition of liability should be increased since detection of the violation within one year is often impossible).