The Investigative Committee of the Russian Federation proposes controls over privatization
The Investigative Committee of the Russian Federation (ICR) has proposed strengthening its control over privatisation, Vedomosti writes today. According to the ICR, the risks of fraud are material in the government’s grand privatisation programme, while the recent anti-corruption investigation at the Defence Ministry revealed manipulations with property lot pricing and breaches of arms-length sale principals. The ICR proposes expanding the disclosure of final beneficiaries, as well as its right to conduct checks and, if necessary, investigative and search operations against auction bidders (according to the ICR, these measures are currently applicable to the sale of strategic assets). It is also proposed to increase the responsibility of independent appraisers and set a criminal liability for the unjustified refusal of privatisation deal approval by the management of state-owned companies, if such a refusal leads to material losses.
The set of measures proposed by the ICR seems to be justified and primarily dictated by the revealed scope of misconduct and fraud during the investigation of large corruption cases, including the Rosobronservice probe. The draft proposals are yet to be discussed before filing to the Duma. The exact scope of this regulation is yet to be clarified and it remains unclear to what extent this could impact the procedures of the privatisation; however, we expect it to have a more pronounced impact on the second-tier privatisation assets, which are usually sold over-the-counter to strategic investors. As of now, the possible impact on the large assets proposed for sale on stock exchanges might be an increase of paperwork and filing, but at this stage it is premature to expect any significant complication of the privatisation of the largest assets.
Alexey Zabotkin, Sergey Galkin, Ilya Piterskiy
VTB Capital analyst
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