Commentary on Article 228. Violation of the Rules for Conducting Transactions with Securities of the Criminal Code of the Republic of Kazakhstan
1. Violation of the rules for conducting transactions with securities, which caused major damage, –
shall be punishable by a fine in an amount of up to two hundred monthly calculation indices, or corrective labour in the same amount, or community service for a period of up to two hundred hours, or arrest for a period of up to fifty days, with deprivation of the right to hold certain positions or engage in certain activities for a period of up to three years or without such deprivation.
2. The same act committed repeatedly or by a group of persons upon prior conspiracy, –
shall be punishable by a fine in an amount of up to three thousand monthly calculation indices, or corrective labour in the same amount, or community service for a period of up to eight hundred hours, or restriction of liberty for a period of up to three years, or deprivation of liberty for the same period, with deprivation of the right to hold certain positions or engage in certain activities for a period of up to three years.
3. The acts provided for in parts one or two of this Article, committed by a criminal group, –
shall be punishable by restriction of liberty for a period of up to five years or deprivation of liberty for the same period.
The public danger of the criminal offence (Part 1 – a criminal misdemeanour, Parts 2 and 3 – crimes) is обусловлена by the fact that, as a result of its commission, there is an intentional violation of the rules established by the state and recommended for conducting transactions with securities, as well as the procedure for monitoring their circulation.
An infringement of the legally regulated procedure for conducting transactions with securities gives rise to “unhealthy” competition, the loss of necessary investors, and a number of other negative consequences for the market and its participants.
The object of the criminal offence is public relations ensuring the priority of the state in conducting transactions with securities, as well as the economic interests of the state and investors in the prospective development of the economy of the Republic of Kazakhstan.
The objective side of the criminal offence is expressed in an act – violation of the rules for conducting transactions with securities, as well as in consequences in the form of causing major damage and the causal relationship between them.
Violation of the rules for conducting transactions with securities may be carried out by means of an unjustified refusal to conduct transactions and/or provide information from the register, making demands for the submission of additional documents not provided for by legislation, violations when entering into the register records concerning the transfer of ownership rights as a result of inheritance, and violations of the deadlines for conducting transactions and providing information.
Violation of the rules established in the securities market for conducting transactions with securities implies the use of unlawful techniques and methods for conducting transactions with securities.
Article 56 of the Law of the Republic of Kazakhstan “On the Securities Market” imposes a prohibition on unfair conduct when carrying out transactions in the securities market. Thus, participants in the securities market are prohibited from:
influencing, in any form, other participants in the securities market for the purpose of changing their behaviour in the securities market;
disseminating inaccurate information for the purpose of influencing the situation prevailing in the securities market;
conducting transactions for the purpose of market manipulation in the securities market.
Persons participating in a transaction recognised as having been concluded for the purpose of market manipulation in the securities market shall bear liability provided for by the Law of the Republic of Kazakhstan “On the Securities Market” and other legislative acts of the Republic of Kazakhstan.
A transaction concluded for the purpose of market manipulation in the securities market may be recognised as invalid by a court upon the claim of interested persons.
Recognition of a transaction concluded on an organised securities market as having been conducted for the purpose of market manipulation in the securities market is carried out by the authorised body following consideration of the opinion of the expert committee established for the purpose of examining issues concerning the recognition of transactions with securities and other financial instruments as having been conducted for the purpose of market manipulation.
Pursuant to paragraph 5 of Article 56 of the said Law, transactions with securities subject to monitoring and analysis for the purpose of identifying transactions conducted for the purpose of manipulation shall include transactions meeting any of the following conditions:
purchase and sale transactions involving securities, the execution of which did not result in a substantial change in the quantity of such securities and/or money held by the parties to these transactions under the conditions and in the procedure established by the regulatory legal act of the authorised body;
a transaction or several transactions carried out on the basis of counter orders for the sale and purchase of securities of the same issue, given by a client to two or more brokers;
a transaction concluded on an organised securities market at a price significantly different from the prices of these securities prevailing in the securities market prior to the conclusion of such transaction;
a transaction carried out using insider information;
a transaction concluded on an organised securities market aimed at establishing and/or maintaining prices for securities above or below those established as a result of the objective ratio of supply and/or demand, or at creating the appearance of trading in a security;
other transactions concluded on an organised securities market that meet additional conditions determined by the expert committee.
The conditions under which transactions involving other financial instruments are subject to monitoring and analysis for the purpose of identifying them as transactions conducted for the purpose of manipulation shall be determined by the regulatory legal act of the authorised body.
The procedure and conditions for recognising transactions with securities or other financial instruments concluded on an organised securities market as having been conducted for the purpose of manipulation shall be established by the regulatory legal act of the authorised body and the internal documents of the stock exchange.
By its structure, the composition of the criminal offence is material. The criminal offence shall be considered completed from the moment major damage is caused.
For the purposes of this offence, in accordance with subparagraph 38) of Article 3 of the Criminal Code, major damage shall mean damage caused to an individual in an amount exceeding two hundred times the monthly calculation index, or damage caused to an organisation or the state in an amount exceeding two thousand times the monthly calculation index.
From the subjective side, the criminal offence under consideration is characterised by an intentional form of guilt (direct and indirect intent). The person is aware that they are violating the rules for conducting transactions with securities, foresees the possibility or inevitability of causing major damage to holders of securities as a result thereof, desires this or consciously allows it to occur.
The subject of the criminal offence is special, namely, an employee of an organisation that is a participant in the securities market.
In accordance with Part 2 of Article 228 of the Criminal Code, this criminal offence may be committed repeatedly or by a group of persons upon prior conspiracy.
Repeated commission shall be recognised as the commission of two or more acts provided for in Part 1 of this Article, or two or more acts provided for in Parts 2 and 3 of Article 228 of the Criminal Code, since, in accordance with Part 1 of Article 12 of the Criminal Code, a criminal misdemeanour and a crime do not constitute repeated commission in relation to each other.
Violation of the rules for conducting transactions with securities shall be recognised as having been committed by a group of persons upon prior conspiracy if persons who have agreed in advance to jointly commit the criminal offence participate in it.
Liability under Part 3 of Article 228 of the Criminal Code arises if the acts provided for in Parts 1 or 2 of this Article are committed by a criminal group.
For the concept of a criminal group, see the commentary to Part 3 of Article 31 of the Criminal Code.
The act provided for in Part 1 of Article 228 of the Criminal Code is classified as a criminal misdemeanour.
The acts provided for in Parts 2 and 3 of Article 228 of the Criminal Code are classified as crimes of medium gravity.
Commentary of 2021 on the Criminal Code of the Republic of Kazakhstan, by Isidor Shamilovich Borchashvili, Honoured Figure of Kazakhstan, Doctor of Law, Professor, Academician of the Kazakhstan National Academy of Natural Sciences, member of the Scientific Advisory Councils under the Constitutional Council of the Republic of Kazakhstan and the Supreme Court of the Republic of Kazakhstan, member of the working group on reform of the law enforcement system under the Security Council of the Republic of Kazakhstan, Honoured Employee of the Ministry of Internal Affairs of the Republic of Kazakhstan.
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