SRO was held vicariously liable for the debts of one of its participants
[ad_1]
The SRO, of which it was a member, was brought to subsidiary liability for the debts of the bankrupt credit cooperative. This is a rare case in judicial practice, and the reason was that the SRO performed its control functions poorly. By law, not all SROs bear subsidiary liability for their members. However, now, according to a number of experts, there is a trend towards increasing the responsibility of SROs, at least in the financial sector.
On February 7, the Seventh Arbitration Court of Appeal held the SRO “National Commonwealth of Credit Cooperatives “Sodeistvie”” to subsidiary liability for the debts of one of its participants. We are talking about the bankrupt credit consumer cooperative (CPC) “Financial House SK”, Sergei Bilyuchenko, a former bankruptcy trustee of the CPC who now represents the interests of shareholders, told Kommersant.
After the bankruptcy of KPK was terminated in September 2023, the manager filed a claim to bring the SRO to subsidiary liability in the amount of unpaid 78.9 million rubles, and the affected shareholders joined him. The latter accused the SRO of inaction, since since the creation of the cooperative (in 2015), more loans were issued than deposits were attracted, which the SRO should have identified back in 2016. Art. 189.3 of the bankruptcy law obliges the SRO, within five working days from the moment certain grounds are identified, to apply to the Central Bank with a request to appoint a temporary administration to the cooperative. The SRO applied to the Central Bank only in June 2021, filing a petition for bankruptcy of the KPK, after massive complaints from depositors and a complete cessation of payments.
The Arbitration Court of the Kemerovo Region rejected the claim, finding that the SRO was not to blame. But the appeal satisfied the requirements. The resolution notes that the SRO conducted the first scheduled inspection of the KPK in 2016, identified a number of shortcomings in the documents and, according to the court, even then had grounds to apply to the Central Bank for appointment to the cooperative as a temporary administration. In addition, it followed from the documents of the CPC that the amounts of attracted personal savings significantly exceeded the loans issued. “The persons controlling the debtor created and maintained a system that actually constituted a ‘financial pyramid,’ that is, a deliberately unenforceable investment system,” the court explained.
“Assistance” referred to the fact that the KPK provided incorrect reporting and then corrected it. But, as the appellate court emphasized, formal corrections did not prevent the SRO from checking “the real financial condition of the debtor.” With proper control, the SRO had the opportunity to apply to the Central Bank back in 2016, and in its absence, the debtor was able to “raise funds from citizens without any restrictions in conditions of economic instability,” the court concluded. The decision lists the shareholders in whose favor the SRO must pay money, the total amount is 78.9 million rubles.
Each person is responsible
“The SRO was obliged to answer for the debts of the credit cooperative because the SRO did not check on time and did not identify signs of a financial pyramid,” explains Case By Case lawyer Yulia Mikhalchuk. If the SRO does not fulfill its duties of control in relation to members, it allows harm to a large circle of people – the shareholders of the cooperative, who will not be able to return their deposits, the lawyer notes. In her opinion, the Assistance case “could become an important precedent” if the district cassation and the Supreme Court support the appeal.
In practice, such cases are rare and concern only SRO KPK, and for other SROs (MFOs, builders, appraisers, auditors, etc.), lawyers do not know of court decisions on holding a bankrupt member liable for the debts.
Executive Director of Management Company Pomoshch Anna Larina explains that not every SRO can be held accountable. Basically, we are talking about cases when the SRO “has certain managerial functions in relation to its members,” clarifies the head of the council of the Union of Arbitration Administrators of the NCRB Valeria Gerasimenko.
Thus, the general director of the association SRO “Cadastral Engineers” Marina Petrushina says that in her area there is no subsidiary liability of SROs: “All cadastral engineers insure their activities, and if the customer suffers damage and there is a court decision, then the insurance company will compensate.” At the same time, the SRO is obliged to monitor activities and, if violations are detected, can impose disciplinary measures, she clarifies, otherwise Rosreestr, as a supervisory body, issues a warning, and then “comes with an unscheduled inspection.”
Outside of bankruptcy cases, there are, for example, cases of subsidiary liability of SRO developers. It is provided for in Art. 60.1 of the Town Planning Code, clarifies Valeria Gerasimenko. The National Association of Builders (NOSTROY) explained that their key task is “to check the experience and qualifications of construction companies in order to mitigate the risks of them performing poor-quality work or violating safety requirements.” At the expense of members’ contributions, two compensation funds are formed, NOSTROY clarified, with the funds from which SROs of builders “bear joint and, since 2017, subsidiary liability for the obligations of their members,” for example, for damage due to deficiencies in construction work or improper fulfillment of obligations under government contracts.
Other SROs in the financial market have not yet faced financial liability for poor quality checks of their members. President of the National Association of Stock Market Participants Alexey Timofeev “has not heard of SROs being held accountable for poor performance of self-regulatory functions.” “We are in constant interaction with the Central Bank, which controls their implementation and sometimes draws attention to certain issues in the control jurisdiction of the SRO,” Mr. Timofeev clarified.
“Approximately once a quarter we receive a letter from the Ministry of Finance with a request to correct identified deficiencies, such as unplaced information in the register, some inconsistency with the disclosed information on the website. Next, the SRO eliminates the identified facts and informs about the elimination of shortcomings,” explains the head of the specialized organization “Commonwealth” (SRO AAS) Olga Nosova, explaining the SRO control scheme for auditors.
The press service of the SRO “MiR” (the largest association of microfinance organizations) reported that in ten years of work it has never been held accountable: “We are responsible under the Code of Administrative Offenses to the Central Bank for failure to comply with regulations, violations of reporting, etc. The SRO KPK is a little different functionality than that of an SRO MFO, and different responsibilities. Among MFOs, only large companies, which are usually under the direct supervision of the Central Bank, have investors.”
SROs must be careful
The difference is that the bankruptcy law directly states the obligations for the SRO of a credit cooperative to apply to the Central Bank. “It follows from these norms that the SRO of the cooperative is liable for its obligations if it does not promptly ask the Central Bank to appoint a temporary administration in the CPC and does not notify of the need for its bankruptcy,” notes Delcredere Bar Association lawyer Alexander Spiridonov. So the legislator “created additional guarantees for CCP shareholders,” he clarifies.
According to Mr. Spiridonov, courts most often reject claims even against cooperatives, considering violations by SROs unproven. “The meaning of membership in an SRO is a kind of additional guarantee for the consumer of services. But in many industries, the activities of SROs are purely formal: they receive contributions, check receipt of reports and carry out some formal activities to control their members,” notes Sergei Bilyuchenko. In his opinion, one of the reasons for this state of affairs is precisely that the courts do not want to hold SROs accountable, considering that “control of the activities of members was formally observed.”
Lawyers clarify that the situation in the credit cooperative market has begun to change. The appeal applied to “Assistance” a “high standard of proper behavior” – even if the head of the KPK tries to hide real financial results and distort reporting, the SRO is obliged to identify such violations and react in a timely manner by reporting this to the Central Bank, explains Mr. Spiridonov.
Thus, the courts are beginning to consider SROs guilty of failing to check the reports submitted by the cooperative against the real state of affairs, notes Mr. Bilyuchenko. “So far, such cases are rare, but, apparently, there has been a trend towards tightening the responsibility of SROs, primarily in the financial market,” he believes.
Most lawyers support increasing the responsibility of self-regulatory organizations. “The main task of an SRO is to control its members, and not just collect contributions,” emphasizes Ms. Mikhalchuk. “This is a kind of “forest orderly” that should help cleanse the market of toxic players.” Mr. Bilyuchenko believes that SROs of organizations working with raised money from citizens “must be careful when checking members.”
[ad_2]
Source link
