The law on categorization of investors will strengthen security on the financial market
Some time ago the law on categorization of investors caused active disputes. To learn more about the project, a representative of the Bank of Russia explained the main points that have undergone changes.
The main goal of the country’s regulator is to create opportunities for citizens to receive income from investments in the financial market. Despite the fact that private investors from Russia rarely suffer from losses, however, isolated cases are quite serious. They can be divided into two categories. The first category includes complaints that a buyer receives a completely different one when purchasing one financial instrument. Most often, a promissory note or bond may be sold to a market participant under the guise of a bank deposit.
The second category of complaints addressed to investors is the loss of a large sum as a result of using a large leverage.
The Bank of Russia decided to carry out an analysis of all received complaints, and on their basis to improve the mechanism of private individuals’ activities in the financial market. The changes have affected various segments, including the introduction of individual investment accounts, which serve as a kind of incentives for players and facilitate trading operations. In addition, the new law sets out mechanisms that protect market participants from losses when acquiring financial instruments of various complexity.
The novelties shall enter into force from April 2022 within the framework of the Law, which regulates the activity on the securities market. The document is intended for both qualified and unqualified investors. People, who obtained this status before the amendments came into force, have the right to operate in the normal mode.
In this case the changes will affect unqualified investors. They will be able to invest only in low-risk assets such as OFZ, shares included in quotations, bonds of Russian companies. To be able to work with risky assets, a market participant will have to pass a special testing. The only exception is unqualified investors who have previously made transactions with such assets.
Simply put, the Bank of Russia wants to provide two different mechanisms to protect persons who interact in the financial market. Qualified investors can use all the functions of the site, but the government does not provide it with a full guarantee of safe operation, except for the control of compliance with the rules of service by other market participants. An unqualified investor is protected from losses that may arise in the event of wrongful acts by an intermediary.
It should be noted that when the new law comes into force, most Russian players will become unqualified investors. Their experience is not sufficient to use the full variety of financial instruments.