Session: "Current Problems of Legal Regulation of the Financial Market"

On 16 October 2015 under the Second All-Russian Educational Forum for Young Lawyers of Russia, the session "Current Problems of Legal Regulation of the Financial Market" was held under the auspices of the HSE Faculty of Law, Senior Fellow at the Institute Kirill Molodyko, Ekaterina Galkova and Maxim Bashkatov, the latter speaking as session leader. The seminar was also attended by invited experts: Elena Abasheieva, chief expert of the Department of Development of Financial Markets at the Bank of Russia; Andrew Pozhitkov, senior vice president at Credit Suisse; Vyacheslav Khorovski, partner at DLA Piper; Alekander Nadmitov, managing partner at "Nadmitov, Ivanov & Partners" and a senior fellow at the Institute simultaneously.

Moderator Maxim Bashkatov opened the meeting of the panel with a report to the audience of the HSE-Skolkovo Institute for Law and Development of his research projects in the field of finance. Then he described one of the current research ventures - namely the legal issues arising from the creation of the Institute of Central Counterparty in the derivatives market. Thereupon he analyzed in detail the legal nature of the interaction  between the parties exchanging derivatives and a central counterparty, criticising the issue of novation. In particular, Maxim noted that the main use of novation as a tool in termination of financial instrument under Article 414 of the Civil Code does not relate to the characteristics of the transactions contained in the law on clearing.

Then the floor was given to Ekaterina Abasheieva who gave details about the directions for the improvement of legislation on 'liquidation netting' in the context of the general prohibition of set-off in bankruptcy.

Vladimir Khorovski spoke about the practical problems associated with syndicated loan agreements. In particular, he considered the structure and the legal nature of inter-creditor agreements, describing the most important loan agreements being ones with multiplicity on the side of the lender.

Alexander Nadmitov talked about the pros and cons of any central counterparty, and also described the difficulties faced by legal regulation of the OTC derivatives market. He described in detail those incentives of financial regulation employed for market participants to follow centralised clearing.

Catherine Galkova presented a report on relations between the basic principles of corporate law: the principle of preservation of capital of the company and the liability of the issuer in a securities prospectus.

She described the doctrinal disputes about the possible civil-legal ways to protect investors and the possible distribution of risk, particularly acute in times of economic crisis. Responsibility of the investors and the allocation of risk between issuers and investors in connection with the assumption by the issuer of errors in the prospectus, is one of the most complex issues in the theory of civil and corporate law. Thus, she drew the audience's attention, while the principle of preservation of capital is deemed to be of particular importance primarily in countries with continental legal systems and is aimed at the protection of the creditors of a company. The same principle of liability for the prospectus is disseminated in all countries of continental and common law basis and is aimed mainly at protecting investors, in particular shareholders. When there is a collision of the above fundamental principles of corporate law, the question of the priority of the protection of creditors or investors, Galkova gave details of various options tied to these principles.

The report of Andrew Pozhitkov focussed on the current practical problems of regulating the derivatives market in Russia, criticizing the current legislation and the practice of stock trading these instruments.

Kirill Molodyko closed the panel meeting, with mention of some of the problems of regulation of consumer loans. He noted the positive nature of certain provisions of the new federal law "On consumer credit (loans)," especially regarding informing borrowers of the true cost of the loan. However, in his opinion, the new law has failed and there are situations that give the Central Bank the right to limit the interest rate on loans based on enforcement practice. The Central Bank prevents a sharp increase (more than 33% per quarter) to current rates on loans - in the context of individual types of loans and certain kinds of creditors. As long as microfinance institutions and pawn shops may continue to legally issue consumer loans at rates well beyond 200% per annum, it undermines, according to Kirill, the meaning of the relevant provisions of the law.