A new stage in the development of the Russian capital market began in September 1996. Due to efforts by the Ministry of Finance to stabilise the economy, yields on government securities have declined and Russia has received an international credit rating. Russia also was included in the International Finance Corporation's global emerging markets index, and the Federal Commission for the Securities Market has become a member of the International Organisation of Securities Commissions.

A legal framework for the securities market has been created, including two basic laws: the 'Law on Joint Stock Companies' and the 'Law on the Securities Market'. The President has issued a Concept for the Development of the Capital Market, outlining the Russian Government's long-range market development programme. Finally, a new Criminal Code will come into effect on 1 January 1997, providing for the prosecution of securities fraud and unlicenced capital market activity.

The 'Law on the Securities Market' lays the foundation for the creation of self-regulatory organisations of market participants (SROs). Presently, new professional associations of capital markets participants are being created, many of which will eventually become SROs.

The Commission has been restructured as a federal executive agency responsible for implementing government policy and exercising control over the activities of capital markets participants. The Commission now has a full-time staff composed of highly qualified professionals, including experts, lawyers and economists.

The Commission has made advances in other areas, including the following:

• licensing of registrars is almost complete;
• the first licences have been issued to specialised depositories and management companies of unit investment funds;
• issue prospectuses of the first three unit investment funds have been registered;
• standards for securities issues by new companies have been issued;
• a regulation on general licensing has been adopted;
• regulations on depository activities and back-office procedures for brokerages have been issued;
• regulations on broker-dealer activities and on stock exchanges are being prepared.

The Commission's policies are based on the 'Law on the Securities Market' and the Concept for the Development of the Capital Market. Our ultimate goal is to turn Russia into a financial centre of international significance.

In order to achieve this goal, the Commission will focus on the following priorities over the next year.

Market regulation

We are now engaged in creating a system of market regulation, comprised of the Commission and regional departments of the Commission. We also intend to push ahead with the practical implementation of a system of self-regulatory organisations as strict mechanisms of control within the framework of state regulation. We will also demand a higher degree of information disclosure and institute fundamental changes in the system of information disclosure by securities issuers.

Infrastructure

We must complete the creation of a basic capital markets infrastructure. We need to create large registers that are more rigorously regulated and interconnected, providing services to all public companies. Consolidations of registers will help to provide a high degree of protection to investors and will also reduce registers' overhead costs. We have also moved towards creating depositories operating in accordance with international standards.

A third priority is the development of organised trading in order to improve liquidity of Russian equities. In addition, we need to reduce the number of stock exchanges by raising standards and requirements.

The Commission is also focusing on several other areas, including:

• creating a well-developed collective investments infrastructure that will allow funds to reduce their costs-per-unit and function effectively;
• establishing a comprehensive regulatory structure for interval and open unit investment funds, including stricter requirements in the area of information disclosure;
• gaining the commitment of collective investors to the basic principle of segregating asset management and safekeeping;
• developing internationally-competitive broker dealers and investment banks in Russia;
• expanding the number of Russian blue chips.

The successful implementation of these goals will depend on an overall improvement in the investment climate. This involves not only the development of regulation and infrastructure, but also issues relating to taxation on investment and securities trades. We also need to find a solution to the Russian accounting system, presently unknown territory for foreign investors. Companies that want to successfully access the financial market must conform to international accounting standards.

The development of the Russian capital market is an essential prerequisite for recovery in the Russian economy, which in turn goes hand in hand with political and social stability. Russia's capital markets participants have already demonstrated their professionalism and responsible attitude. They have achieved accomplishments that were unimaginable just four years ago.

Thanks mainly to their efforts, the Russian capital market today is firmly in place and is continuing to undergo dynamic development.