The draft federal law On Amendments to the Federal Law On the Securities Market and Certain Legislative Acts of the Russian Federation was submitted by State Duma deputies Alexander Babakov and Vasily Shestakov.

In accordance with Clause 3 of Article 104 of the Russian Constitution, the Government of the Russian Federation has reviewed the submitted draft federal law. The subject of the draft law is the state regulation of Forex dealer trading activity for contracts in their name and at their expense which are derivative financial instruments hereinafter referred to as Forex-transactions with physical and juridical entities.

Taking into account the nature of the legal relations arising between the parties based on the aforesaid contracts, the draft law should be appended with clauses to ensure a high level of transparency for pricing when Forex- transactions are effected in order to limit the possibilities of manipulating price data.

According to Paragraph Four, Clause 3, Article 4¹ of the Federal Law On the Securities Market, hereinafter referred to as the Law, the draft law edition proposes that disputes between Forex dealers’ clients and Forex dealers related to their participation in the transactions concluded on the off-exchange Forex market should be considered by the arbitration court.

These statements in essence refer the cases to arbitration courts and establish a legal basis for the aforesaid subjects to apply for the protection of their interests; thus they lie outside the scope of the subject of the legal regulation of the Law since arbitration court jurisdiction is determined by the Arbitration Procedural Code of the Russian Federation, whereas grounds for filing a complaint in court  is regulated by the Civil Code of the Russian Federation in accordance with Clause 2 of Article 1062 which states that requirements stipulating a party or parties to a transaction to pay proceeds depending on changes in the prices for goods, securities, currency exchange rates, inflation rates,  interest rates, or on factors based on an aggregate of the above, or on another statutory circumstance which may or may not be deemed as arising, should be legally protected only if the aforesaid transaction is concluded at the stock exchange.  

Paragraph 5 of Clause 3, Article 4¹ of the draft law edition needs clarification since the grounds for contesting transaction, on the one hand, are subject to wide interpretation, while at the same time, have incorrect wording, as violations of the provisions of a contract serve as reason for liability but not for contesting.

The provisions of the draft law on the national association of Forex dealers as a self-regulating organisation run contrary to Clause 3 of Article 1 of the federal law On Self-Regulating Organisations.

There are a number of significant concerns with regard to the draft law which will be sent to the State Duma, provided the legislative initiative is pursued further.