The Concept and Types of Crimes that form Illegal Transactions with Securities

Vinner Eleonora Romanovna Postgraduate student, Department of Criminal Law, Kutafin Moscow State Law University 121374, Russia, Moscow, Sadovaya-Kudrinskaya str., 9 elenmarkova007@gmail.com Other publications by this author

Economic relations certainly need state regulation, which finds its manifestation in the norms of positive legislation. And the protection of economic activity from criminal encroachments is one of the tasks of the criminal law, the implementation of which, first of all, is carried out by establishing a ban on harming such activities under threat of punishment. The specific object of crimes, responsibility for which is established in Chapter 22 of the Criminal Code of the Russian Federation, is state-regulated entrepreneurial, financial and credit, foreign economic activity, customs regulation.

The credit and financial sphere includes a set of institutions such as: credit and banking institutions, stock exchanges, financial and insurance companies that operate within the financial market, including the securities market. Strictly speaking, this market ensures the normal functioning of the credit and financial sector in terms of securities turnover.

Analysis of the content of Chapter 22 of the Criminal Code of the Russian Federation allows us to formulate a conclusion that crimes representing illegal transactions with securities include:  

- abuse in the issue of securities (Article 185 of the Criminal Code of the Russian Federation);

- malicious evasion from disclosure or provision of information determined by the legislation of the Russian Federation on securities (Article 185 ¹ of the Criminal Code of the Russian Federation);

- market manipulation (Article 185 ³ of the Criminal Code of the Russian Federation);

- illegal use of insider information (Article 185 ⁶ of the Criminal Code of the Russian Federation).

Meanwhile, not all scientists agree with this statement. Thus, in the theory of criminal law, the position is expressed that crimes for which responsibility is established in Articles 185 ³ and 185 ⁶ of the Criminal Code of the Russian Federation do not infringe on the legal circulation of securities.

These crimes, according to E.L. Sidorenko and E.A. Khalizeva, certainly relate to the illegal circulation of securities (although they are not limited to them) and are included in the system of these crimes in many foreign countries (in particular, in the USA). N.A. Tabakova believes that Article 185 ³ of the Criminal Code of the Russian Federation "Manipulation the market", refers to the system of crimes committed on the RZB. M.V. Talan, the object of the crime in question calls public relations, which are designed to regulate the procedure established by the legislation of the Russian Federation, the procedure for providing information about securities. From the point of view of G.A. Rusanov, the object of the crime, responsibility for which is provided for in Article 185 ³ of the Criminal Code of the Russian Federation, are public relations that ensure the pricing procedure in the securities market. Thus, it should be stated that the majority of scientists investigating crimes in the sphere of securities turnover, the object of market manipulation is recognized as the established procedure for performing transactions with securities. 

As for the direct object of such a crime as the misuse of insider information (Article ^185.6 of the Criminal Code of the Russian Federation), according to the positions expressed in the theory of criminal law, this crime encroaches on the established procedure for ensuring fair pricing of financial instruments, foreign currency and (or) goods, equality of investors. Property interests are recognized as an additional object. E.A. Mamochka suggests that the direct object of the crime, responsibility for which is established in Article 185 ⁶ of the Criminal Code of the Russian Federation, public relations that ensure fair pricing of financial instruments, foreign currency and (or) goods, equality and strengthening investor confidence. According to G.A. Rusanov, the direct object of the crime under consideration is public relations in the sphere of circulation of securities, foreign currency or goods. Summing up the consideration of various theoretical positions, it can be concluded that the misuse of insider information encroaches, among other things, on the established procedure for securities turnover. Market manipulation and the misuse of insider information are only partially included in the system of crimes under consideration, since they relate to polyobject elements of crime, where various social relations (independent, non-subordinate) are combined into one norm of the law on criminal liability. Such an object in the theory of criminal law is also called summary.

For this study, it is of interest that until 2010, Article 185 ³ of the Criminal Code of the Russian Federation was called "Manipulation of prices in the securities market" and was formulated differently. Currently, it is called "Market Manipulation". Responsibility for this act comes, among other things, for manipulation at the RZB, as evidenced by judicial practice (the Kirovsky District Court of Kazan convicted a former employee of a local bank who manipulated securities). However, it should be borne in mind that criminal liability in the article under consideration is established not only for transactions with securities, but also other financial instruments, foreign currency and goods. Thus, this crime encroaches on several main direct objects, one of which is the established procedure for the circulation of securities. 

Article 185 ⁶ of the Criminal Code of the Russian Federation establishes liability for the intentional use of insider information to carry out transactions with financial instruments, foreign currency and (or) goods to which such information relates. That is, this crime encroaches on several main direct objects, among which, the established procedure for the circulation of securities.

It seems that the crimes for which responsibility is established in Articles 185, 185 ¹, 185 ^{3,185 6} of the Criminal Code of the Russian Federation encroach on the procedure for conducting operations (issuance and circulation) with securities regulated by the state. 

Regarding the direct object of these crimes, in the science of criminal law, the position is expressed that the object of the crimes listed above are investment relations. Without disputing the legitimacy of the allocation of such a public relation as a direct object, we still note that it is difficult to support this position for the following reasons. To begin with, let's turn to the concept of the investment market. Such a market "represents a set of legal relations mediating, firstly, the process of investing, investing property and other objects in the activities of investment organizers and, secondly, the turnover of investment rights: shares, bonds, investment units, etc. At the same time, the investment market is a broader concept than the securities market, which can be considered as part of the investment market, since it includes relations related only to shares, bonds and options of the issuer." Assuming that the stated position has the right to exist, we still allow ourselves to agree with it, since the securities market hardly includes only relations related to investments. In our opinion, some of the relations existing in the securities market are also relations in the investment market, and vice versa. In other words, these relations overlap, but do not completely coincide.

The norms of the criminal law listed above are primarily aimed at protecting the fundamentals of the functioning of the securities market, including:

- legality of operations carried out on it; 

- legality of the issuer's actions, for example, related to the issue of securities, disclosure of information, etc.; 

- legality of the activities of professional participants in the securities market and other persons, such as insiders.

It seems that investment relations can only act as an additional object. 

The protection of the interests of the debtor and the creditor in the case of illegal transactions with securities is ensured through the establishment and compliance with certain processes established in regulatory legal acts of regulatory legislation.

An additional argument in favor of the opinion expressed by us is the fact that securities that are traded on the secondary market, immediately after the issue, cease to be investment. Such a paper, by changing its holder, can contribute to the increment of speculative capital, but will not contribute to the direction of investment resources in the sphere of production or services.

Next, you should decide what securities transactions are. Let's make a reservation right away that it is impossible to identify transactions with securities with transactions with them. Transactions are of an economic nature, and transactions are of a legal nature. Transactions begin before a transaction or a set of transactions is made to secure it. In the most general form, transactions with them can be defined as actions with the specified financial instrument on the securities market committed to form, increase capital, attract borrowed capital, secure the obligations of the subject of transactions to customers in respect of securities or the obligations of the client related to securities. A huge number of transactions are carried out on the securities market. Let's name three main groups of such operations. These are emission operations (passive operations), which are aimed at raising funds by issuing securities; investment operations, they are also called active operations, because they are aimed at placing available resources (acquisition of stock assets as a result of stock trading, on the OTC market); client operations are carried out primarily in order to obtain income from the provision of various additional services in the securities market. Client operations, in turn, are divided into two types: intermediary and technical. The first are carried out by professional market participants (brokers, dealers), in order to provide services for the purchase and sale of securities. Technical operations are operations that are related to the technical side of the execution of a securities transaction, carried out by clearing organizations, depositories, registrars.

It is also necessary to consider the division of operations into cash and speculative. Those operations that are aimed at extracting profit from the transaction in the form of income directly from specific securities (for example, dividends on shares) are called cash. Speculative operations are aimed at extracting profit from the transaction due to changes in their exchange value during subsequent resale.

In any case, transactions with securities are carried out in accordance with the regulatory legislation of the Russian Federation, including the regulations of the Bank of Russia.

Next, it is necessary to indicate which types of illegal financial transactions existing on the securities market and prohibited by criminal law will be analyzed in this paper. Firstly, these are operations performed during the passage of the issue, leading to its invalidity or recognition as invalid (Article 185 of the Criminal Code of the Russian Federation). Secondly, operations that undermine the transparency of the securities market, which consist in violating the rules of information disclosure by evading or providing deliberately incomplete or even false information (Article 185 ¹ of the Criminal Code of the Russian Federation). Thirdly, operations related to price manipulation of Article 185 ³ of the Criminal Code of the Russian Federation). Fourth, operations based on insider information (Article 185 ⁶ of the Criminal Code of the Russian Federation). 

The subject of these crimes is information about securities. To begin with, it should be noted that in the theory of criminal law there is no unity of views on the definition of the subject of a crime. Thus, A.A. Piontkovsky identified the subject of the crime with its object. N.I. Korzhansky believed that the subject of the crime can only be understood as a concrete thing of the material world, in which certain properties of the object of the crime find their manifestation. Physical or mental impact on this thing and causes socially dangerous harm in the sphere of public relations. V.A. Galakhova understands by the subject of the crime specific material objects about which the act is committed. According to I.A. Yurchenko, "At the moment, the subject of a crime should be understood as a tangible or intangible object of the objective world or a product of the digital environment provided for in a specific part of the crime, which is available for criminal encroachment either directly or using technical means or information technologies. Thus, the subject of the crime should be considered in the context of three signs: 1) it is what the crime is being committed about; 2) it is available for possession, destruction or damage by the person committing the crime; 3) it is provided for in the specific composition of the crime as a mandatory feature. In the conditions of digitalization of all aspects of the life of society, the material, physical nature of the subject of the crime has lost its primacy."

The blank nature of the norms containing criminal liability for encroachment on the established procedure for the circulation of securities makes it difficult to establish the subject of these crimes.

In the comments to the Criminal Code of the Russian Federation, textbooks on criminal law, the question of the subject of crimes infringing on the established procedure for the circulation of securities is either not considered at all, or is covered very sparsely.

The statement that the information relates to the subject of the crime is among the controversial. There are three main approaches to the concept of "information". Firstly, mathematical (cybernetic). Secondly, semantic (semantic). Thirdly, practical, related to the use of information in a certain area of human activity. As you know, there are four such spheres – economic, political, social, spiritual. Law belongs to the political sphere.

The legal definition of information is given in Article 2 of Federal Law No. 149-FZ of 27.07.2006 "On Information, Information Technologies and Information Protection" (hereinafter - the Law "On Information"). According to this law, information is information (messages, data) regardless of the form of their presentation. 

The current criminal law contains a number of crimes that infringe on information or are committed with the help of information. This means that in the first case it acts as an object, and in the second as a means.

The functioning of the securities market would be impossible without ensuring proper information security. If we consider the securities market as a set of economic relations, it is necessary to indicate that they are based on information about securities and their owners. Information about securities and information contained in securities. 

The Law "On Information defines two main categories of information. This is publicly available information and information to which access is restricted. The first category includes well-known information, as well as other information, access to which was not restricted by anyone (Article 7 of the Law "On Information). The second category includes information, access to which is restricted by law (Article 9 of the Law "On Information"). 

Federal Law No. 224-FZ of July 27, 2010 "On Countering the Misuse of Insider Information and Market Manipulation and on Amendments to Certain Legislative Acts of the Russian Federation" (hereinafter referred to as the Insider Law) establishes the legal regime of information on securities. Insider information in the financial market remains inaccessible to an unlimited number of persons for a short period of time, after which it is disclosed. According to Article 2 of the Insider Law, insider information is accurate and specific information that has not been disseminated (including information constituting commercial, official, banking secrets, communication secrets (regarding information about postal money transfers) and other secrets protected by law) and the dissemination of which may have a significant impact on prices financial instruments, foreign currency and (or) goods.  

Article 92 of the RZB Law establishes cases of mandatory disclosure of information on the securities market by issuers. Article 8.6 of the same Law contains the specifics of information disclosure by registrars and depositories. 

Article 30 of the RZB Law defines the information on securities subject to disclosure. 

Understanding the fact that the subject of the crime should reflect the properties of the object of criminal law protection, allows us to formulate a conclusion that the subject of the analyzed acts in Articles 185,185,185,185 ^{3,185 6} of the Criminal Code of the Russian Federation is information about securities, including information about their prices. 

Further, we consider it necessary to highlight the issue of the blankness of the norms analyzed in this work. Their specified property is due to the peculiarities of protected public relations, for the regulation of which, the state issues regulatory legal acts that affect the possibility of applying the norms of criminal law. Blank dispositions allow you to change the scope of criminal law regulation without formally changing the text of the criminal law. The norms of law providing for liability for violations of regulatory requirements contained in industry legislation can only play a supporting role. They are needed only in order to ensure by force of state coercion, their execution by all participants in economic activity, as well as by persons who are called upon to influence such activities. At the same time, on the one hand, the description of crimes should not duplicate the norms of sectoral legislation, as this may lead to an increase in the text of criminal law norms, which will create difficulties in their perception, as well as to their frequent changes, since the norms regulating economic activity are developing quite rapidly. On the other hand, it is impossible not to take into account the norms of sectoral legislation, since the provisions of the criminal law should be aimed at protecting concrete, existing in reality, and not abstract social relations. 

The widespread use of the blank form of presentation in the construction of the norms of the criminal law establishing responsibility for crimes in the field of economic activity is positive. This technique of legislative technique is necessary in order to bring Russian legislation into a harmonious, consistent state. It serves the purpose of strengthening intersectoral ties, it cannot be dispensed with in situations where rules are established in the norms of regulatory legislation, and they are protected by the norms of criminal law. Therefore, understanding and improving the norms of the criminal law, in terms of liability for illegal transactions with securities, is impossible without understanding the provisions of regulatory legislation. 

The task of effective criminal law protection of the securities market can be ensured only when the norms of regulatory regulatory legal acts are clear and do not allow for different interpretations. 

Crimes that constitute illegal transactions with securities are understood to be acts that infringe on the procedure for conducting transactions with securities regulated by the State. 

Illegal transactions with securities should be recognized as acts committed during the passage of the issue, leading to its invalidity or recognition as invalid, undermining the transparency of the securities market, consisting in violation of the rules of information disclosure, by evading or providing deliberately incomplete or false data related to price manipulation or carried out under the influence of insider information. 

The peculiarity of the crimes under consideration is, firstly, their blank nature, and secondly, the subject is information about securities.

You can simply select and copy link from below text field.