Vladimir Putin ordered a crackdown today on insider trading in Russia's ailing stock markets and said that the country should create its own debt ratings agencies.

The Russian Prime Minister said that traders guilty of insider dealing would face prison terms of up to seven years under proposed new legislation.

He told Cabinet ministers: "Punishment for these wrongdoings should become real and unavoidable."

He also said that ratings agencies should seek accreditation from the Finance Ministry in future, only a week after Russia's long-term local and foreign currency rating was downgraded by Fitch Ratings.

He said that international agencies failed to understand the Russian markets.

"We are interested in the appearance of powerful domestic ratings agencies, which will have a fuller knowledge of Russian market peculiarities and will offer accessible and quality terms not only to large companies but also to medium businesses," Mr Putin said.

Russian companies were totally dependent for their debt ratings on foreign agencies, which were "focused on the economies, customs and business practices of other states".

Mr Putin added: "All of us understand the enormous influence of ratings agencies and drastic effects their mistakes, let alone abuses, may have."

He said that accreditation would be voluntary, however. Recognition of an agency would imply the Finance Ministry's seal of approval for "the correctness of its evaluations and conclusions".

"In turn, that will give more reliable guidelines for investors and do away with the absurd situation in which entities evaluating the reliability of others are exempt of any control," Mr Putin told ministers.

Fitch's decision to downgrade Russia from BBB+ to BBB came amid concerns over the impact on its economy of falling oil and gas prices, and a draining of foreign capital.

Moody's and Standard & Poor's took similar action in December.

Vladimir Milovidov, head of the Federal Financial Markets Service, said that Russian media could also face prosecution for publishing information "that can impact market trends".

The service would investigate if evidence emerged of corrupt dealings between editors and company directors.

Insider trading in Russia is widespread but offenders are rarely caught and face only fines under existing legislation.

Mr Milovidov said that only two cases had been recorded in the past two years.

Government amendments introducing jail terms will go to the Duma, the lower house of the parliament, which began considering a new Bill against insider dealing in December.

Vladislav Reznik, head of the Duma's financial markets committee, said that he expected the legislation to be ready by May.

Russian stock exchanges have been hammered by the global economic crisis.

The dollar-denominated RTS index has lost three quarters of its value and the rival Micex exchange, which trades in roubles, is down by two thirds.

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