Anti-Corruption Legal Education: Opportunity for Government Civil Servants to Own Securities (Part 1)

23 January 2023, Monday

1. What is a security?

According to paragraph 2 of Article 142 of the Civil Code of the Russian Federation, securities are a share, a bill of exchange, a mortgage, an investment share of a mutual investment fund, a bill of lading, a bond (including a federal loan bond, a bond of a constituent entity of the Russian Federation), a check and other securities named in such as in law or recognized as such in the manner prescribed by law.

2. Is a futures a security?

The civil legislation of the Russian Federation does not provide for such a type of security as "futures" and "futures contract". A futures contract is a derivative financial instrument, not a security (Decree of the Bank of Russia dated February 16, 2015 No. 3565-U "On the types of derivative financial instruments").

Thus, this document does not address the issue of futures and futures contracts held by government civil servants. At the same time, we draw your attention to the fact that when acquiring a “future” and (or) “future contract”, it is necessary to take into account the anti-corruption standards applicable to a civil servant, in particular the requirement to prevent and (or) resolve conflicts of interest, the prohibition to directly or indirectly own and (or) use foreign financial instruments (as a consequence, prevent them from being violated).

3. Is a civil servant entitled to own securities?

As a general rule, civil servants are not prohibited from acquiring securities, with the exception of the case provided for by the Federal Law of May 7, 2013 No. 79-FZ “On the Prohibition of Certain Categories of Persons from Opening and Maintaining Accounts (Deposits), Keeping Cash and Valuables in Foreign banks located outside the territory of the Russian Federation to own and (or) use foreign financial instruments” (hereinafter – Federal Law No. 79-FZ dated May 7, 2013).

In relation to the persons specified in Article 2 of this Federal Law, there is a ban on directly or indirectly owning and (or) using foreign financial instruments, which include, in particular, securities and related financial instruments of non-residents and (or) foreign structures without forming a legal entity, which, in accordance with the international standard "Securities - International Securities Identification System (International Securities Identification Codes (ISIN)", approved by the international organization for standardization, has been assigned an international security identification code. It should be noted that according to paragraph 4 of Part 1 of Article 17 of the Federal Law of July 27, 2004 No. 79-FZ “On the State Civil Service of the Russian Federation”, civil servants are prohibited from acquiring, in cases established by federal law, securities on which income can be received, however, at present such cases are training in the Federal Law of May 7, 2013 No. 79-FZ.

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