Good corporate governance practices are starting to take root in Russia but they have a long way to go before shareholders can be sure of rights they get in the West, the head of Russia's markets watchdog said Friday.

Igor Kostikov, chairman of the Federal Securities Commission, said the transformation was at times an uphill battle but that most investors failed to see just how far the country has come in a little more than a decade.

"The changes are dramatic. The changes are dynamic. Anyone who has been there in the last two years knows that," he said in an interview at a corporate governance conference in the Dutch capital.

"Unfortunately, most people don't understand just how far we have come," he said.

"They don't know that more and more of our companies are coming on board, realizing themselves just how much they have to benefit from good governance as well."

Kostikov said among the most important changes being made was legislation that would give his largely toothless agency some bite, including the ability to refer cases to criminal courts.

A number of bills have already been passed, including changes to the Criminal Code that open top managers to prosecution for failure to make timely disclosures or for misleading disclosure.

Still other legislation is bogged down in parliament, including bills on insider trading and price manipulation -- although Kostikov hopes that they can be pushed through still this year.

But the drama unfolding at Yukos shows that corporate governance remains a live issue in Russia. On Friday, prosecutors searched the oil company's archives.

The search, which lasted 17 hours, followed the arrest of a key Yukos shareholder, Platon Lebedev, and his being charged with the theft of state property.

(The Moscow Times 14.vii.03)