¥Securities and Stock Exchanges
–Draft law on securities and stock
exchanges first considered by USSR Supreme Soviet on July 10, 1991
–Adopted December 1991 after Russian
securities market was in operation
–Goal was to protect stockholders, from
incompetence and dishonesty
–Stock issuers prior to sale or issuing
of stocks or securities required to publish in at least 2 newspapers preliminary
comprehensive and absolutely trustworthy information about the securities and
the financial position
of the entity or persons issuing them
–Introduces legal concept of property
qualification
–Question of stockholder protection or
new arena for bureaucratic graft and corruption
–Within months of passage, Russian stock
market with registered securities totaling more than 100 billion rubles was
facing liquidity crisis
¥Causes of liquidity crisis:
–Few joint-stock companies had tangible
or real assets to back up their securities
–Joint-stock companies ÒinvestmentÕ companies
–Nearly all stock being sold on secondary
market were overvalued
–Weak to nearly non-existent financial
infrastructure and lengthy delays in payments under high inflationary conditions
made any business deal risky
–Liquidity crisis was rapidly developing
in current accounts for current supplies
–Virtually no system for collection and
public disclosure of financial information
–What would financial disclosure
statement of Òsoft-budgetÓ state
enterprise look like?
–Little time elapsed for development of
reliable business reputation
–Russian statutes on securities, criminal
and administrative codes still lacking
–No unified policy for purchasing and
selling of securities among former Òruble zoneÓ republics