Russian c-bank aims to strengthen protections for retail investors

Maria Nikolova

There are disagreements on how to define qualified investors, as having a capital of at least RUB 10 million seems to be an insufficient condition.

The Expert Council for the Protection of the Rights of Financial Services Consumers at the Central Bank of Russia is seeking to beef up the protection of retail investors. The stance was made clear during a meeting of the Expert Council held on November 22, 2019.

The meeting participants discussed the requirements for testing non-qualified investors on their knowledge about certain financial instruments. According to the Expert Council, the questions for the tests have to be drafted by the central bank and the regulator has to conduct inspections on whether the testing is conducted according to the rules.

Another important topic discussed during the meeting concerned the criteria for defining an individual as a qualified investor. There were disagreements on this matter, in particular on whether having financial assets of at least RUB 10 million may serve as a sufficient condition to recognize an individual as a qualified investor. Information was shared that some elderly people have sold their homes in order to invest in securities and lost their homes and savings as a result.

Further, the meeting participants discussed the list of financial instruments that are available to non-qualified investors without pre-testing of their knowledge (such as closed pie investment funds). Proposals were made to organize tests with focus groups comprising individuals without experience in securities investments. This is set to help assess the level of understanding of newbie investors of certain financial instruments.

Nikolay Gonchar, Member of the Russian Duma, stressed that lately the number of retail investors has marked a significant rise and is set to grow further. Due to this, the bill for the protection of investors’ rights has to be passed swiftly.

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