How The Investor Classification Law Will Affect The Stock Market | The Blk Projek

  • How The Investor Classification Law Will Affect The Stock Market

    The legislation governing investor classification has changed dramatically several times. According to the trade community, the enacted statute allowed for a compromise between market interests and investor protection. The market has time to prepare for new developments because the law takes effect on April 1, 2022. However, the fight is far from over: work continues on problems of testing and rules of the Russian Federation’s Central Bank on the criteria for allowing unqualified investors – who are becoming increasingly common on the Russian market – to assets.

     

    Qual or lost

    According to the law, which was passed by the Federation Council on July 24 after being voted by the State Duma on July 21, there will be two types of investors in Russia: qualified and unqualified. The former will be able to conduct all financial market operations, whereas the latter will face a variety of restrictions as a result of the agreement. Only some securities are eligible for qualified investor status. At the same time, people who were qualified investors before the law’s implementation will continue their position as such after its implementation.

    Invest in Russian

    The law also tightens the admission of foreign securities to trading on Russian stock exchanges without an agreement with foreign issuers. After the law comes into force, these securities will be able to trade on Russian stock exchanges if they are included in stock indices approved by the Bank of Russia, or if a market maker is appointed for each security. If securities leave the approved indices or lose a market maker, then they can circulate on the exchange for another six months, but then must be delisted. At the same time, if security has already been traded on the Russian stock exchange before the entry into force of the law, then it can be traded there and further, and not be delisted. In addition, the document gives the exchange the right to admit foreign securities to trading without complying with the requirements of the law, if they are already admitted to trading in Russia by another exchange. And by the way, you can visit

    Qualifications are in the details

    Previous versions of the bill were even more severe: it was assumed that the maximum amount of “risky” investments for specially protected investors would be 50 thousand rubles. per year, and the number of indices, foreign shares of which can be traded on Russian stock exchanges, will be much less. All this created the best competitive conditions for foreign intermediaries, including for operations in Russia from abroad. Market participants noted that this may lead to the fact that the Russian industry will be forced to create opportunities for its clients to conduct operations abroad.

    Brokers’ work will change

    After the standards are developed, it will be possible to estimate the specific costs of brokers for testing, says Andrei Salashchenko, Deputy General Director of Otkritie Broker for Interaction with Authorities and Public Organizations. “Of course, the costs of deploying the testing system and its support will be. You will also have to significantly change the logic of executing customer orders since the prescribed restrictions will need to be incorporated into all automated systems.

     

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