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#7 - JRL 7134
The Electronic Telegraph (UK)
April 7, 2003
An Enronsky scandal? Not in my backyard, say Russia's regulator
By Malcolm Moore

A corporate scandal on the scale of the Enron fraud could never occur in Russia, says the Russian financial services regulator. Igor Kostikov, chairman of the Federal Commission for the Securities Market (FSC), claims he has powers that surpass his Western counterparts.

He said: "We drew up our corporate governance code much later, so we were able to learn from some of the mistakes that have happened. We have the most comprehensive laws and many of my Western counterparts have said that they would like to have this power."

His comments, made on a visit to see Sir Howard Davies, outgoing FSA chairman, come before stringent new Russian laws on insider trading are introduced on April 14.

Mr Kostikov, 43, who did his thesis at Oxford University on UK privatisation and who was seconded to London to work for Friends Provident, holds ministerial rank in the Russian government.

He admits that he learnt a great deal from the "great corporate governance disasters of the 1990s: Robert Maxwell, BCCI and Polly Peck".

Mr Kostikov has found willing co-operation among the eight "oligarchs" that run most of Russia's industry. "Since we introduced tougher regulation three years ago, there are now three Russians in the Fortune list, and 80pc of their success is due to corporate governance."

The new rules will give the FSC powers to crack down on insider trading and the right to initiate investigations of up to eight months, which can have access to all internal financial documents.

Ekaterina Makeeva, head of the legal department at the Russian trade body representing stock market participants said: "The FSC now has unlimited rights to interfere into brokers' activity and get access to their financial documentation."

But with the amount capitalised in the Russian market - $127 billion (80 billion) - now three times what it was two years ago, few will argue against Mr Kostikov's powers.

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