7 Sep 2022 10:55

CBR to gradually bar unqualified investors from trading "unfriendly" securities starting Oct 1

MOSCOW. Sept 7 (Interfax) - The Central Bank of Russia (CBR) will begin imposing restrictions on October 1 on unqualified investors' purchases of securities issued by companies from "unfriendly" countries.

Beginning October 1, brokers will no longer fulfill orders from unqualified investors to purchase the securities of issuers from "unfriendly" countries if the transaction would result in the share of these securities exceeding 15% of the investor's portfolio, according to an order the CBR sent to brokers and posted on its website.

This threshold will subsequently be reduced to 10% as of November 1 and to 5% as of December 1, and as of January 1, 2023 brokers are supposed to stop executing any instructions from unqualified investors to increase their exposure to the securities of foreign issuers from "unfriendly" countries.

This decision is intended to minimize infrastructure risks for unqualified investors, since foreign financial institutions that hold such securities can block the ability to dispose of the acquired assets without warning, the CBR said. More than 5 million investors have already been victims of such freezes, and it is very difficult to defend the rights of the owners of these securities after the fact, since the solution to the problem lies outside of Russian jurisdiction, the CBR said.

The order also applies to the purchase and sale of deliverable derivatives, the underlying assets of which are foreign securities of issuers from "unfriendly" countries, and instructions to carry out transactions to increase short positions on such securities.

The restrictions do not apply to transactions to close short positions or transactions with the foreign securities of Russian companies and issuers from "friendly" countries.

The CBR will make a decision regarding transactions with the securities of issuers from "friendly" countries at a later time, taking into account the results of market players' efforts to build a custody system that does not involve the depositories of "unfriendly" countries.