The Federal Financial Markets Service (FFMS) wants to obtain access to recordings of professional brokers’ phone conversations. By doing this, authorities plan to reveal financial violations and to track insider trading. Most agree that monitoring will help solve disagreements between brokers and their clients, though it will likely not be an effective measure for preventing leakage of company information.
This intention of the FFMS was announced publicly by the FFMS’s deputy director. The service wants to obtain the right to carry out independent investigations.
The new draft law on insider trading is under consideration in State Duma now. It includes provisions for access to records of all brokers’ conversations kept by their companies. As soon as the new law is passed, the FFMS plans to use its right.
Market participants differ in their opinions of this saying that “listening-in” is a function of law enforcement agencies and should be kept within the frame of investigatory actions. However, access to the records may be passed to other agencies, such as the Ministry of Finance, the Pension Fund, and others.
Currently, authorities must gain permission for listening-in from a court. Lawyers add that if the FFMS desires to broaden its authority, a new, separate law will have to be passed as currently such actions will be a violation of the brokers’ constitutional rights.
Proponents of the bill add that the FFMS may act as a arbitrator in protecting consumers with their new power. If, for example, a broker made a mistake in placing an order. Brokers explain that a client makes a purchase or sale by calling in, introducing himself, giving his code, voice password, the type and amount of security he/she wishes to buy or sell, and the price at which to buy or sell. If at least one of these requirements is not fulfilled, the client may raise a claim against the broker based on the recording of his phone conversations.
According to experts, if the recording is held by a third party (i.e. by the FFMS), it will contribute to a fair settlement of dispute in court. As for the FFMS intention of using it for the prevention of insider trading, the chances of its success are doubtful since other means of information exchange can be used besides phone conversations. Moreover, information leakage may also take places under the provisions.
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