MOSCOW - Russia is moving to regulate its infant mutual fund market.
The Federal Securities Commission, established in November to develop Russia's stock market, is drafting several laws to bring order to the underregulated mutual fund area.
Mutual funds do exist in Russia, but they are few and far between. In 1993, Zerikh Bank, Moscow, established a short-term bond fund. It since has added two more funds. First Voucher Bank, Moscow, and BSB Co., Perm, also plan to start similar funds.
Individual investors are sitting on about $20 billion in various hard currencies, according to Ministry of Finance estimates. Savings total 20% to 40% of the average family's budget. Plus some $250 billion to $300 billion is held abroad by wealthier Russians.
Tim Frost, president of Pioneer Investments, the Moscow-based unit of Pioneer Group, Boston, said "anything and everything is possible here." Still, foreign companies are not racing to set up mutual funds.
"Pioneer Investments would like to launch a mutual fund in Russia but will wait until the capital market infrastructure is developed to higher standards," Mr. Frost said. In addition, mutual funds are subject to double taxation, discouraging individual investment, he said.
President Boris Yeltsin soon is expected to sign a decree to alleviate the tax problem and lay the legislative groundwork for creation and management of "share investment funds."
Under the draft decree, a mutual fund manager would have to be licensed by the Federal Securities Commission. A special depository or a register would hold a list of investors and provide certificates to investors.
Legislation also is being considered to regulate Russia's securities market. The bill has been ratified by the Duma, but still needs approval of the parliament's upper chamber.
Another bill, expected to be introduced shortly, will regulate investment funds. It would permit investment in stocks, bonds, real estate, bank deposits and other assets. It also would permit redemptions at any time or at periodic intervals. But lack of trust law may hinder adoption of the bill, experts said.