The objective side of abuse in the issue of securities (Part 1 of Article 185 of the Criminal Code of the Russian Federation)

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

The crime in question is committed during the emission procedure, and since it is a certain process, it is necessary to determine the moment of its beginning and the moment of its end. It should be noted here that since January 1, new versions of the Law on the RZB and the Regulations of the Bank of Russia No. 706-P of December 19, 2019 have come into force. "On Securities Issue Standards"^[1].

The issue of securities is understood as a legally regulated procedure for issuing securities, placing them for circulation, including selling them to the first owners. This procedure consists of several stages. Strictly speaking, the issuance procedure may be different based on the type of securities. Thus, the procedure for issuing shares, bonds and options of the issuer includes the stages provided for in paragraph 1 of Article 19 of the Law on the RZB ^[2]. If there is an issue of Russian depositary receipts, then it should include the stages defined in clause 5 of Article 27.5-3 of the Law on the RZB.

As a rule, the standard issue includes five stages: making a decision on the placement of equity securities; approval of the decision on their issue (this stage is not always mandatory); registration of their issue or additional issue; placement of equity securities; state registration of the report on the results of their issue or additional issue.

The specifics of the procedure of the process under consideration may be determined by the Bank of Russia, taking into account the legislation of the Russian Federation on banks and banking activities. This happens in the case of the establishment of joint-stock companies that are credit organizations.

It is important to note that the specifics of the procedure for issuing state and municipal securities are contained in Chapter 14.1 of the Budget Code of the Russian Federation^[3].

The stages of this procedure established in the regulatory legislation should be located among themselves in a certain logical sequence. If it is violated, it will lead to the suspension of the issue.

Next, we consider it necessary to analyze each of the stages of the issue. First of all, a decision is made on the placement of equity securities or another decision that is the basis for the placement of equity securities. The adopted decision on the implementation of the issue, in some cases, needs approval. It should be borne in mind that in such cases, the decision includes not only a positive vote, but also the approval of documents, for example, "Release Decisions". This is a document that describes the issuing company very briefly, contains general characteristics of the issued securities, describes the rights under them and the terms of placement.

Depending on the type of securities, various issuers are authorized to issue them. In particular, only joint-stock companies have the right to issue shares. Both state authorities, local governments, and corporations have the authority to issue bonds. In the first two cases, the placement is carried out on behalf of the Russian Federation or the municipality, respectively.

It is not difficult to notice that today in our country the issue of shares is mainly carried out, while, for example, in the USA, Germany, Switzerland, Japan, bond issues exceed the number of share issues. This is explained, firstly, by the fact that only corporations can be issuers of shares, and both companies and the state can be issuers of bonds. Secondly, the fact that the issue of bonds is more profitable for companies for a number of reasons, among which it can be noted: the price of the process, the speed of placement among investors, the number of shareholders^[4]. This indicates the "youth" of the Russian securities market.

The next stage involves the state registration of the issue (additional issue) of equity securities, which is carried out either by the Bank of Russia, or the registrar, or the exchange, or the central depository.

At this stage, documents confirming the issuer's compliance with the established requirements are provided to the registering organization. The list of required documents is established by the Bank of Russia, as well as internal documents of the exchange, which regulates its activities on registration of issues of equity securities and prospectuses of equity securities. Now it is already allowed to submit such documents in electronic form. If the registering organization is the Bank of Russia, then you can submit documents through the use of information resources, a list of which is posted on the Regulator's website. In other cases, the documents are sent via the Internet information and telecommunications network.

The Law on the RZB provides for the obligation of the Bank of Russia to carry out a preliminary review of the documents required for registration of the issue of equity securities. To do this, the issuer must send a corresponding application. This allows you to avoid refusal of registration associated with incorrect registration by the issuer of the documents required for registration.

If the submitted documents suit the registering organization, then the issue of equity securities is assigned a state registration number.

Then the actual placement of equity securities on the market takes place. This stage of emission is, as a rule, the longest in time. Thus, depending on the type of securities and the chosen method of their placement, the issuer may have additional obligations, without which the issued securities cannot be sold. For example, if a company is going to place shares of a new issue by subscription, it is obliged to ensure the pre-emptive right of shareholders to purchase shares of a new issue before they can be purchased by third-party investors. Such a right is granted by law to the owner of shares of the same type as the shares being placed.

In the event that the issue is carried out with the registration of a securities prospectus, it is necessary to disclose the information contained in the prospectus in the mass media (on the Internet) before placing it.

In any case, the issuer is obliged to complete the placement no later than the deadline specified in the Decision on the Issue. It is usually one year from the date of state registration of the issue. In some cases, it is possible to prolong this period. For example, when the law permits amendments to the Decision on the issue of securities or to the prospectus of securities. However, it should be noted that the total period, taking into account the extension, should not exceed three years from the date of state registration of the issue.

In addition, the number of issued securities to be placed must correspond to the number specified in the terms of their placement.

The final stage means the state registration of a report on the results of the issue (additional issue) of equity securities or the submission of a notification on the results of the issue (additional issue) of equity securities. The latter takes place when issuing securities for exchange trading.

As we can see, the emission procedure is a long and painstaking process that can be accompanied by a lot of violations. However, not all of them may entail criminal liability, but only those acts that are alternatively specified in Article 185 of the Criminal Code of the Russian Federation. Among them:

— entering into the prospectus of the issue of securities or a document including the terms of their placement of obviously unreliable information;

— approval of a prospectus or a report (notification) on the results of the issue of securities containing deliberately false information;

— confirmation of a prospectus or a report (notification) on the results of the issue of securities containing deliberately false information;

— placement of equity securities, the issue of which has not passed state registration.

The introduction of deliberately false information into the prospectus of securities or a document including the terms of their placement is aimed at misleading investors about circumstances that may have a significant impact on the decision to purchase equity securities by an investor.

The approval or confirmation of a prospectus or report (notification) containing false information on the results of the issue of securities consists in the fact that it is signed by those persons who are authorized to do so by the issuers. Approval or confirmation means that the issuer confirms the accuracy and completeness of all information contained in the securities prospectus or the report (notification) on the results of the securities issue.

Placement of issue-grade securities, the issue of which has not passed state registration, in cases where it is mandatory, is in itself socially dangerous, since the placement must be carried out after the state registration of the issue of securities.

It is allowed to place securities without registration during the reorganization of joint-stock companies in the form of separation or separation carried out simultaneously with the merger or with the accession (Clause 7 of Article 19.1 of Federal Law No. 208-FZ of December 26, 1995 "On Joint-Stock Companies")^[5].

If registration of two or more issues or additional issues of securities or registration of two or more bond programs of one issuer is carried out simultaneously, one securities prospectus may be drawn up and registered in respect of securities of such issues or bond programs.

If the registration authority reveals violations during the issue, then either this body or the court has the right to make a decision on verifying the authenticity of the submitted documents. The type of violation affects the choice of the form of response. Article 26 of the RZB Law provides for: suspension of the issue, refusal to register the issue of securities, recognition of the issue of securities as invalid or failed. The procedure for suspending and resuming the issue of securities, recognizing the issue (additional issue) of equity securities as invalid is established by a regulatory act of the Bank of Russia. In cases where the registration of the issue (additional issue) of equity securities was carried out by the registering organization, the suspension and resumption of the issue of such securities, the recognition of the issue (additional issue) is carried out by the decision of the relevant registering organization.

The issue of securities may be suspended at any stage of the issue procedure until the state registration of the report on the results of the issue (additional issue) of equity securities. If the issue procedure does not provide for the state registration of a report on the results of their issue (additional issue), before the placement of equity securities. The suspension of the issue may result in:

— violations of legal requirements committed by the issuer during the issue;

— the presence of false information or misleading information in the documents on the basis of which the registration of the issue (additional issue) of securities was carried out, and (or) documents submitted for state registration of the report on the results of the issue (additional issue) of securities.

In case of detection of these violations, the issuer must stop the placement of securities and eliminate the identified deficiencies.

The issue (additional issue) of equity securities may be declared invalid after its registration and before the state registration of the report on the results of the issue (additional issue) of equity securities, and if the procedure for issuing securities does not provide for the registration of such a report, before the placement of equity securities. As grounds for recognition of the issue as failed, the legislator provides:

— violation of the requirements of the legislation committed by the issuer during the issue, which cannot be eliminated otherwise than by withdrawal from circulation of the issue securities (additional issue);

— the presence of false information or misleading information in the documents on the basis of which the registration of the issue (additional issue) of securities was carried out, and (or) documents submitted for state registration of the report on the results of the issue (additional issue) of securities, which entailed a significant violation of the rights and (or) legitimate interests investors or holders of equity securities;

— the issuer's failure to submit to the Bank of Russia a report on the results of the issue (additional issue) of equity securities in time after the expiration of their placement (the report must be submitted to the Bank of Russia no later than 30 days after the completion of the placement of equity securities);

— refusal of the Bank of Russia to state registration of the report on the results of the issue (additional issue) of equity securities in cases where its registration is mandatory;

— non-placement of any issue security of the issue (additional issue);

— failure by the issuer to comply with the requirements of the Bank of Russia or the requirements of the registering organization that registered the issue (additional issue) of equity securities to eliminate violations of the requirements of the legislation of the Russian Federation committed during the issue of securities.

The issue (additional issue) of issue-grade securities may be declared invalid on the basis of a court decision on the claim of the Bank of Russia, the registering organization that registered the issue (additional issue) of issue-grade securities, or the body that carries out state registration of legal entities, as well as on the claim of a participant (shareholder) of the issuer or the owner of issue-grade securities of the issuer. the same type, category (type) as the issue securities of the issue (additional issue).

Placement of securities is a stage of their issue, at which transactions aimed at alienation of securities by their first owner take place. If the placement was not preceded by a state registration procedure, provided that such registration is mandatory, then it violates the legally established emission procedure and certainly has a public danger. In this case, the placement of securities makes their turnover opaque and indicates that the issuer is unlikely to fulfill its obligations. The risk of investors acquiring such securities becomes quite high, since the prospect of their profitability and liquidity is unclear. There is no certainty about the completeness and reliability of the accompanying information.

A mandatory sign of the objective side of the crime, responsibility for which is provided for in Article 185 of the Criminal Code of the Russian Federation, is a socially dangerous consequence in the form of causing major damage to investors. However, it should be noted that abuses during the issuance of securities and causing damage to investors cannot be in a causal relationship. Let us explain this statement. The results specified in Article 185 of the Criminal Code of the Russian Federation cannot be created by the described actions. In our opinion, the inapplicability of the analyzed norm is connected precisely with the impossibility of establishing a socially dangerous consequence, despite its nominal certainty in the note. Since the establishment of the acts described in Article 185 of the Criminal Code of the Russian Federation can hardly cause difficulties. This is evidenced by judicial practice in arbitration and administrative cases. However, it is a large damage that is a sign that allows you to distinguish a crime from a similar administrative offense (Article 15.17 of the Administrative Code of the Russian Federation)^[6]. First of all, it should be clarified that such damage can only be caused to the property of investors in the amount of their invested funds or other property. And here again the question arises about the immediate object of the crime in question. As the analysis of Article 185 of the Criminal Code of the Russian Federation shows, its name and the nature of the act "speak" about one object — the established procedure for issuing securities, and socially dangerous consequences about another — the property of investors^[7]. It is assumed that the main purpose of the norms of the criminal law is to protect public relations, which should not compete with each other. So, if harm is caused to property by abuse during the issue of securities, then the analyzed crime should be moved to chapter 21 "Crimes against property". Then, the actions specified in Article 185 of the Criminal Code of the Russian Federation will be a way of harming investors' property. On the other hand, the article in question is placed by the legislator in chapter 22 "Crimes in the sphere of economic activity". We believe that there are no signs in the analyzed norm that make it possible to recognize one object as the main direct, and the other as an additional direct. The conclusion about the two-object or poly-object nature of crimes can be formulated based on the presence of two objects of crime (Article 186 of the Criminal Code of the Russian Federation), an additional object of crime (Article 159.6 of the Criminal Code of the Russian Federation), a goal or motive (Article 277 of the Criminal Code of the Russian Federation), a method (Article 162 of the Criminal Code of the Russian Federation), etc.

Problems also arise when trying to understand the mechanism of causing damage to investors^[8]. First of all, it can't be real. So, if the issue is declared invalid or invalid, it will entail the cancellation of the registration of the issue, the withdrawal from circulation of the issue securities of this issue (additional issue) and the return to the owners of such issue securities, cash or other property received by the issuer in payment for them. If the intent of the attacker was aimed at seizing money or other property of investors, then this constitutes fraud (Article 159 of the Criminal Code of the Russian Federation). Apparently, the legislator, constructing the disposition of Article 185 of the Criminal Code of the Russian Federation, had in mind the temporary borrowing of funds or other property of investors. Under such circumstances, in the analyzed norm, the damage may be expressed in the so-called lost profits. It would seem that it is possible to describe major damage in this case with reference to paragraph 2 of Article 15 of the Civil Code of the Russian Federation ^[9], but this will be abstract in nature, which will cause problems with evidence. Conclusions about the lost profits in the described situation will be assumed. This may be the non-receipt by the injured party of probable income; loss of property; decrease in the value of property. That is, in this case, it is not possible to calculate the amount of damage. Although it is she who separates the crime from the administrative offense. Considering that the amount of damage has a direct impact on the decision on bringing to criminal responsibility, its calculation should definitely be reduced to a single denominator, but in this case it is impossible. Moreover, "a guilty verdict cannot be based on assumptions and is decided only on the condition that during the trial the defendant's guilt in committing a crime is confirmed by the totality of the evidence examined by the court" (Part 4 of Article 302 of the Criminal Procedure Code of the Russian Federation)^[10].

So it is safe to say that the socially dangerous consequences reflected in Article 185 of the Criminal Code of the Russian Federation do not allow it to be applicable in practice, do not allow to correctly identify the immediate object in theory. "The problems affecting the disclosure and investigation of crimes under Article 185 of the Criminal Code of the Russian Federation include the establishment of a mandatory qualifying feature — causing major damage as a result of abuse in the issue of securities. Classically, such damage is defined as money invested in securities and not received by the investor as a result of abuse during the issue"^[11].

Official statistics reflecting the number of criminal cases initiated under Article 185 of the Criminal Code of the Russian Federation hardly correspond to reality. And first of all, this is due to the imperfection of the current norm. In this regard, a new version of Part 1 of Article 185 of the Criminal Code of the Russian Federation is proposed.

Article 185. "Abuses in the issue of securities".

1. Entering into the prospectus of securities, a document including the conditions for the placement of knowingly false information, approval or confirmation of a prospectus or report (notification) containing knowingly false information on the results of the issue of securities that resulted in the recognition of the issue as invalid or invalid, as well as the placement of issue-grade securities whose issue has not passed state registration, except in the following cases when the legislation of the Russian Federation on securities does not provide for state registration of the issue of equity securities…

We consider it appropriate to exclude the note to Article 185 of the Criminal Code of the Russian Federation. The definition of damage should be provided in the note of those articles where such a socially dangerous consequence will be a mandatory feature.

The proposed revision, firstly, allows to take into account legislative changes in the part of documents containing information about securities; secondly, to avoid the consequences in the form of damage; thirdly, it does not create problems in determining the type of intent and delineation with the offense, responsibility for which is established in Article 15.17 of the Administrative Code of the Russian Federation "Unfair issue securities". The sign distinguishing the administrative offense and the analyzed crime will be the degree of violation of the established emission procedure. Thus, the refusal of the registering authority to register the issue of securities entails minimal risks for the investor, since the issue procedure is terminated in this case. With the suspension of the issue, as well as the refusal to register the issue of securities, the risks for investors are also minimal. These violations will have to entail administrative liability under Article 15.17 of the Administrative Code of the Russian Federation. If the issue is declared invalid or failed, the risks for investors increase significantly, since in this case the issue securities are withdrawn from circulation. This means that investors' investments will not bring them the expected income, moreover, it may take quite a long time to return their funds or other property.

Since only the Bank of Russia can recognize the issue as invalid, it can be proposed to regulate the order of interaction of the bodies conducting the inquiry and preliminary investigation with the specified regulator by creating a joint regulatory legal act.

Only a court can invalidate an issue. In this case, law enforcement agencies will have to wait for the appropriate decision to initiate a case.