Pallada Asset Management, whose future on the Russian equity market dimmed last week after it failed to get its license renewed, is back in business again – after spending a week in the local bureaucratic purgatory – following the Federal Securities Commission's (FSC) decision to review its earlier negative stand on the issue.

The commission's decision to renew Pallada's operating license diffused the tension that had pervaded the budding market following the denial, as key equity-market participants had expressed fear that the incident would become routine in cajoling them into toeing the commission's unclear procedural rules.

The commission is the official watchdog on domestic equities.

Pallada, rated first for best performance and fifth in assets in 2001 by Kommersant and an active player on the local equities market for more than five years, was denied renewal of its license in February for what the commission said was its failure to meet established steps for renewal.

Commission officials were not available for comment, but Financial Izvestia quoted the FSC press secretary Ilya Razbash as saying Pallada had submitted incomplete documents on two occasions. "All firms operating on the equities market are equal before the laws irrespective of their reputations or longevity on the market," he said.

But Pallada executives attributed the refusal to renew their license to the commission's vengeful stance against the company, saying the decision was based more on a technicality than a legal basis.

Pallada has been on the FSC blacklist since last year, when it had problems registering amendments to Pensionny Fond, one of its most innovative unit investment funds, said Pallada CEO Elizabeth Hebert.

"But the commission refused to register the amendment until I was unofficially told that I would not get anything registered with the commission unless I moved out of St. Petersburg," she said.

"Initially, I did not want to comply with this bizarre and incredible demand, but when I could not get any reasonable deal registered with the commission for more than six months, I decided to comply," she added.

"On the insistence of FSC Chairman Igor Kostikov, the commission said it would only register the amendments to the Pensionny Fond if we changed the name to a new one. This was a blow below the belt because we invested a lot of resources in the name only to be stripped of it.

"While Pallada had problems amending its fund's terms last year, the commission speedily granted a similar request to our competitor, an asset-management firm affiliated with the ABK company, which was headed by Kostikov prior to his appointment to the commission.

"We believe that Kostikov's personal commercial interests on the equities market are in conflict with his official duty as the chief market regulator," Hebert said, adding that the commission is not only abusing its powers, but is also "directly harming the market and the investors and the credibility of the transactions."

Moscow Interbank Currency Exchange (MICEX), another financial institution on the equities market, weighed in last week, saying it has also fallen victim to the commission's unclear bureaucracy.

"For more than six months now, the FSC has refused to grant us a license, without which we cannot launch our new policies," MICEX's officials said in a statement.

"The commission only used our case to drive home its point: If Pallada, with all its connections on international equities markets, can be treated this way, then other smaller and less-well-connected local companies have no alternative than to toe the general line," Hebert said.

Meanwhile, the FSC downplayed the issue, noting that, as an official market regulator, it is bound to face conflicts with market players.

"There is always that probability, because someone will always remain unhappy with our decisions," Razbash said.

He lashed out at Pallada's management, calling its behavior undisciplined, and, hence, the main cause of its numerous conflicts with the commission:

"For instance, it presented the required documents according to law this time around. Why didn't they do that earlier, or did they just find out about renewal requirements yesterday?"