Commentary on Article 226. Entering Knowingly False Information into the Register of Holders of Securities of the Criminal Code of the Republic of Kazakhstan
1. Entering knowingly false information into the register of holders of securities, which resulted in the transfer of rights to these securities to another person, —
shall be punishable by a fine in the amount of up to two hundred monthly calculation indices, or corrective labor 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.
2. The same act, which caused major damage, —
shall be punishable by a fine in the amount of up to two thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to six hundred hours, or restriction of liberty for a period of up to two years, or imprisonment 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.
The public danger of the criminal offense (Part 1 — a criminal misdemeanor, Part 2 — a crime) is обусловлена by the fact that, as a result of entering knowingly false information into the register of holders of securities, the rights to these securities are transferred to another person.
The object of the criminal offense is public relations arising in the securities market sector and directly related to the performance of professional activities involving the maintenance of the register of securities.
The subject matter of the criminal offense under consideration is the system of registers of holders of securities — a body of information about the issuer, issued securities and their holders, ensuring the identification of holders of rights to issued securities at a particular point in time, the registration of securities transactions, as well as the nature of registered restrictions on the circulation of or exercise of rights under such securities, and other information in accordance with the regulatory legal act of the authorized body for regulation, control and supervision of the financial market and financial organizations (subparagraph 9) of Article 1 of the Law of the Republic of Kazakhstan “On the Securities Market”).
A security is a set of certain records and other designations certifying property rights (paragraph 1 of Article 129 of the Civil Code and subparagraph 4) of Article 1 of the Law of the Republic of Kazakhstan “On the Securities Market”).
According to subparagraph 12) of Article 1 of the Law of the Republic of Kazakhstan “On the Securities Market”, a holder of a security is a person registered in the system of registers of holders of securities or in the nominal holding accounting system, possessing rights under securities, as well as a unit investment fund whose unit holders possess, under the right of common shared ownership, rights to securities included in the assets of the unit investment fund.
The objective side of the criminal offense consists of actions involving the entry of knowingly false information into the system of registers of holders of securities, which resulted in socially dangerous consequences in the form of the transfer of rights to securities to another person, as well as the causal relationship between the actions committed and the consequences that occurred.
In accordance with Article 58 of the Law of the Republic of Kazakhstan “On the Securities Market”, a nominal holder is obliged to:
“1) exercise constant control in order to prevent errors resulting in the distortion of information contained in the client's personal account;
retain information contained in the nominal holding accounting system and enabling the sequence of changes made to the client's personal account to be established or restored;
make changes to the client's personal account in the manner and within the time limits established by this Law;
provide the client with reliable information in accordance with the concluded nominal holding agreement”.
The functions of a nominal holder are:
accounting for the client's securities and ensuring their availability when transactions involving such securities are carried out;
registration of transactions involving the client's securities;
confirmation of the client's rights to securities;
representing the client's interests when concluding transactions involving securities transferred into nominal holding;
bringing to the client's attention information concerning securities transferred into nominal holding;
other functions in accordance with the nominal holding agreement that do not contradict the legislation of the Republic of Kazakhstan (paragraph 1 of Article 59 of the Law).
Pursuant to the provisions of paragraph 2 of Article 59 of the aforementioned Law, a nominal holder is prohibited from:
1) registering a transaction involving securities that does not comply with the requirements of the legislation of the Republic of Kazakhstan;
2) making changes to the client's personal account (sub-account) that do not comply with the requirements of the legislation of the Republic of Kazakhstan;
registering a transaction involving securities without a client's instruction, except in cases established by this Law and the regulatory legal act of the authorized body;
using the client's money and securities in its own interests or in the interests of third parties, or without the client's corresponding written authorization, except in cases established by the legislation of the Republic of Kazakhstan”.
False information may relate to various information contained in the register of holders of securities. Thus, false information may be expressed, for example, in misleading information regarding the owner of securities, their quantity, transactions involving securities in the personal account of a registered person, etc. The legislator has provided for the transfer of rights to securities to another person as the consequence of this act.
By its structure, the composition of the criminal offense under consideration is formal. The criminal offense shall be considered completed from the moment knowingly false information is entered into the register of holders of securities, resulting in the transfer of rights to these securities to another person.
From the subjective side, the act constituting the criminal offense is committed only with direct intent. The perpetrator is aware that they are entering knowingly false information into the register of holders of securities, foresees the possibility or inevitability of consequences in the form of the transfer of rights to these securities to another person as a result of such actions, and desires the occurrence of such consequences.
The subject of this criminal offense possesses the characteristics of a special subject; it may only be a sane natural person who has attained the age of sixteen and performs the duties of a registrar.
Under Part 2 of Article 226 of the Criminal Code of the Republic of Kazakhstan, liability arises if major damage is caused as a result of entering knowingly false information into the register of holders of securities. In accordance with subparagraph 38) of Article 3 of the Criminal Code, with regard to Article 226 of the Criminal Code, damage caused to an individual shall be recognized as major if it exceeds two hundred times the monthly calculation index, while damage caused to an organization or the state shall be recognized as major if it exceeds two thousand times the monthly calculation index.
The act provided for in Part 1 of Article 226 of the Criminal Code is classified as a criminal misdemeanor.
The act provided for in Part 2 of Article 226 of the Criminal Code is classified as a crime of minor gravity.
2021 Commentary on the Criminal Code of the Republic of Kazakhstan by Isidor Shamilovich Borchashvili, Honored 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 the Reform of the Law Enforcement System under the Security Council of the Republic of Kazakhstan, Honored Employee of the Ministry of Internal Affairs of the Republic of Kazakhstan.
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