The Central Bank has proposed to punish brokers for unfair intermediation


The Bank of Russia intends to change the principles of regulation in the financial services market, having established the liability of brokers, dealers and asset management companies for bad faith mediation. These proposals are contained in published on Monday its consultation report “improving the regulation of brokering activities”.

The Central Bank concluded that the current regulatory system is outdated. “This regulation is based on the formal model, which does not tolerate deviations as in the definition of what a brokerage, and in the description of the services and tools”, — declared the Chairman of the Central Bank Vladimir Chistyuhin. According to him, in particular, under the regulation do not fall mediation services that offer their customers the investment company.

As an example, the controller distinguishes three types of mediation services offered by the brokers: “shop stock” (stock sale as a regular item on dealer scheme with the opportunity to pay by plastic card via Internet), services for investment of the “portfolio of securities” (recommendations for the formation of an independent investor’s investment portfolio), as well as services of type “avtosvedenie”, consisting in the repetition of transactions in the account of the client from a specific market participants (social trading, mirror trading, copy trading).

In all these cases, according to Chistochina, these services are “on the verge of brokering activities” and do not fall under the regulation. “It is not entirely clear that it is brokering, asset management or even some hybrid services,” he says. However, according to the Central Bank, all of these services can be considered by the regulator as financial intermediation services and participants should be accountable for their investment results. “They (the participants — ) actually offer these services. I hate to say “impose”, but sometimes this kind of aggressive offer, and they must share the responsibility for investing together with the customer,” — said Chistyukhin. The Chairman of the Central Bank stressed that the responsibility should be borne solely by brokers, who give advice to their clients. “If the mediator is strictly obey the instructions of the client, actually without affecting its portfolio of assets, it shall not be held responsible for the consequences of investments”, — explained in the CBA.

However, if we determine that the financial intermediary has incorrectly assessed the risk profile of the client, if he did not disclose all the information about the risks or concealed it, as suggested Chistyukhin, the broker must indemnify the customer. A similar responsibility, he believes, should be introduced for professional participants who, in the interests of a more meaningful client can offer the investor an unacceptable deal. In particular, such a conflict of interest may arise in case of participation of the investment companies in the offering of shares or bonds. “It may make sense to talk about the ban operations when, for example, the mediator acts as an underwriter and promotes some assets, and at the same time offers them to their clients. Obviously, there is a conflict of interest is obvious, to control it difficult. To simplify, you can simply forbid such operations,” — said the Chairman of the Central Bank.

Experts believe that the introduction of such a ban is too strict norm. According to the President-CEO of “Finam” Vladislav Kochetkova, it is sufficient that the broker is just announced to customers that it is involved in the organization of these securities. “In some countries brokers even indicate your fee for such a service. In Russia, the brokers do not. Moreover, the terms of the agreement with the Issuer may prohibit the disclosure of such information,” he says. However, the financier does not exclude cases where professional market participants can deliberately offer investors risky asset. “But in this case it is necessary to use the principle of risk-profiling: qualified investor may purchase the securities, it is aware of the possible consequences. Broker shall not be responsible for his investment decision,” — said Kochetkov.

Similar requirements are contained in the amendments to the law “On securities market”, which in June 2016 were adopted by the state Duma in the third reading. The bill proposes to introduce the Institute of financial advisers, who can act as a brokers, management companies, financial consultants. They will need to log in to the self-regulatory organization and meet the qualification requirements of the Central Bank. Without the participation of the financial Advisor to private investors with less than 400 thousand RUB. will be able to buy only OFZ, to invest in deposits, certificates of Deposit, invest in a simple insurance products, voluntary pension insurance and keep the savings in the consumer credit cooperatives. To trade stocks or currency in the stock exchange investors, who are in third grade, alone.”

The Central Bank expects that the draft law on financial intermediaries will be passed this year, said Chistyukhin.

The Bank of Russia do not exclude that in the future for unscrupulous consultants in addition to financial responsibility may be subject to administrative sanctions, including revocation of the license.

The Central Bank stressed that all the proposals of the consultation report will be discussed with the market. Consultation with the participants should be completed by mid-December. By this time, calculates Chistyukhin, must end with the advice associated with this issue another Advisory report on the investment classes, which it is proposed to separate private investors depending on experience, vocational education and welfare.

Deputy General Director of “Veles Capital” Alexey Bushuev considers that it is necessary to impose liability for unfair or unprofessional business for the participants. In his view, the controller tries to impute brokers non-core functions. “Either we have a Chinese wall between the asset management and brokerage services, or we will control all under a single supervision. And there is not without excesses,” he says. The consequence of the introduction of the discussed measures, according to Bushueva, may be leaving customers in the offshore company on the Forex market, where no such restriction.

According to the financier, to fight regulations and the control of unfair financial intermediaries useless, was more effective to introduce soft certified investors to improve the financial literacy of citizens.

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