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Proportional regulation and risk-based supervision of collective investment market entities: outcomes of discussion with the professional community

02.11.2018 17:06 / The Bank of Russia

Several limitations on investing non-governmental pension fund (NPF) holdings could be gradually lifted once the results of NPF stress tests are available. There are also plans to extend the list of pension fund investment options. These are the outcomes of the public discussion of the Concept of Proportional Regulation and Risk-based Supervision of Collective Investment Market Participants.

The professional community overall voiced its support for the Bank of Russia-proposed changes to the investment funds law, aimed at doing away with redundant UIF operation requirements for qualified investors. Under the draft law, standard trust management rules would be done away with, the procedures for registering trust management rules and submitting UIF termination reports to the Bank of Russia would be replaced with their mere concurrence with the specialised depository; and several types of notifications previously submitted to the Bank of Russia and the statutory audit of such UIFs would also no longer be required.

As regards management companies’ reporting, the Bank of Russia thinks it feasible to explore the option of reduced requirements for the scope and frequency of qualified investors’ statutory reporting on UIFs.

In the course of the discussion, market players floated the option of including information security in the scope of proportional regulation, as well as possible concurrent service for individual executives and employees at collective investment entities.

The concept the Bank of Russia presented for discussion in July described approaches to proportional regulation and risk-based supervision of various non-bank financial institutions including collective investment market participants. The document notes that currently the operations of such market players are, to a great extent, regulated based on the proportional approach. In this way, the scope of regulatory requirements is subject to the type and scale of operations of management companies and UIFs and, accordingly, to the scope of risks assumed.

Based on the discussion results, the regulator unveiled a roadmap for the rollout of collective investment market regulation. The roadmap outlines steps to take place through 2020.

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