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NAUFOR Deems Bank of Russia Investor Rights Protection Excessive

17.08.2016 16:27 / NAUFOR

The National Association of Securities Market Participants sent a letter to the Central Bank with comments on the Bank of Russia report "Improving the protection of investors in the financial market regulation by introducing categories of investors and determine their investment profile."

The report suggests the introduction of a three-tier classification of investors (according to different combinations of their knowledge, experience and financial situation of the client) and the application of different rules of interaction with clients based on these categories.

According NAUFOR, the report contains "excessively paternalistic" approach to protecting consumers of financial services. In a letter NAUFOR noted that the redundancy in limiting the risks of investors lead to difficulty of access to financial services and reduce market liquidity. "There is a risk that the implementation of the provisions of the report will sharply decrease the volume of certain markets, in particular, of the exchange traded derivatives market, which is currently dominated by private individuals", says the letter.

NAUFOR believes that the level of investor protection should be balanced with the interest of investors in the stock market transactions. "Violation of this balance can lead to a loss of interest in the operations of the stock market and will deprive the meaning of the protection of investors' interests, as they prefer to ignore the stock market", states the letter.

NAUFOR proposes to maintain the approach to defining the range of operations available to different categories of investors, and the criteria for differentiating between categories of investors, currently in force. At the same time it proposed to supplement the regulation NAUFOR brokering requirement of evaluation of certain transactions in compliance with the client's investment profile.

The Bank of Russia has published a new report on the categorization of investors at the end of June this year. Shortly after the publication NAUFOR Board of Directors has formed a working group instructed to study the provisions of the report, taking into account their possible impact on the stock market.

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