The Bank of Russia proposed cutting off Russian unqualified investors from investing in foreign securities. To do this, the regulator proposes to introduce restrictions that are unbearable for ordinary Russians, including a minimum asset threshold from 6 million rubles to 30 million. Innovations for the stock market and millions of Russians who have brokerage accounts are reported by the Bank of Russia.
At the moment, citizens of the Russian Federation who are able to prove to their broker the necessary level of knowledge (confirmed by professional experience, specialized education or passing tests), and also have liquid assets in the amount of 6 million rubles (all funds in different banks and assets in different brokerage accounts). After obtaining the status, the investor becomes available to a much wider list of financial instruments, the use of which is associated with increased risk and for which special knowledge is required.
The Central Bank believes that the current system for obtaining a “qual” (the status of a qualified investor) is too soft and should be tightened; moreover, the regulator wants to cut off all non-qualifiers from foreign instruments, including shares of popular foreign companies. The Central Bank calls the restrictions for “nequals” temporary and associates them with sanctions risks, but the regulator does not give any deadlines. As an argument, the Central Bank uses the statistics of blocked foreign assets in the accounts of Russian investors. According to him, 5 million investors of Russian brokers faced the blocking of assets due to sanctions, while only the total value of the frozen shares is estimated at 320 billion rubles, and the total volume is even higher.
Mikhail Mamuta, Head of the Service for Consumer Rights Protection and Ensuring the Accessibility of Financial Services of the Bank of Russia, during the presentation of proposals, justified the need for restrictions on "risks of a fundamentally new nature – risks of the accounting infrastructure." He insists that these risks are incomprehensible to a wide range of investors.
“At the moment, such transactions are potentially extremely risky. The continued increase in the positions of investors entails an increase in risks, the consequences of which an unqualified investor cannot manage, and, unfortunately, neither the market nor the regulator can help him in this,” Mamuta believes.
Mamuta insists that the Russian side is not to blame for the risks, and therefore the Central Bank can influence them "very, very limitedly." It is not planned to deprive the status of a qualified investor of those who have already received it, but, for example, do not meet the new criteria, according to Mamuta. If the innovations are adopted, the “non-quals” will be able to sell their assets to the “quals” and professional market participants or continue to hold them, but they will not be able to buy new foreign securities.
The Bank of Russia also compares Russians with citizens of Europe, where a similar status can be obtained with at least €500,000 in assets, although for some reason the regulator does not take into account the difference in income between Russians and Europeans. At the current exchange rate (55.9 rubles per euro), the barrier for investors will be even higher than in Europe – approximately €536,000.
Qualified investors are also subject to restrictions, which will affect trading with leverage (transactions in which an investor borrows money from a broker in order to increase his profits). Now the borrowed funds used as a result of trading will be “deducted” from the investor’s assets, and the leverage standards will be tightened. The regulator is trying to justify the tightening of measures with statistics on 27.8 thousand portfolios of retail investors, which went negative as a result of aggressive trading with leverage in the amount of 2.5 billion rubles. Against the background of the total number of investors (24.7 million owners of brokerage accounts), this amount looks negligible and amounts to just over 0.001% of all investors in Russia.
During the presentation, representatives of the Central Bank repeatedly said that the proposed restrictions are proposed to be introduced temporarily, but they did not provide specific dates, indicating as a guideline "improvement of the situation and increasing the ability to manage risks." “Predicting when the situation will return to normal is currently very difficult. Now there is a very large zone of uncertainty, including for financial intermediaries and infrastructure organizations,” said Filipp Gabunia, Deputy Chairman of the Bank of Russia.
Rumors about a ban on investing in foreign securities were circulating in the spring – immediately after the start of the war with Ukraine and the first financial sanctions. At the same time, a ban on investing in foreign securities within the framework of individual investment accounts was discussed (IIA, a special account on which you can get a tax deduction, was created to attract retail investors to the stock market). However, retail investors suffered the main losses not because of the regulator’s actions and investments in foreign companies, but because of the start of the war: on the day of Russia’s invasion of Ukraine, the Russian stock market collapsed by 50%, millions of Russians suffered losses.
This is not the first time that the Bank of Russia has used the rhetoric of “protecting Russians” to impose severe restrictions. Prior to this, the Central Bank pointed to the “high risks” of holding savings in foreign currency, but these risks are relevant only for legal entities that are at risk of facing the sanctions regime. For individuals, keeping savings in foreign currency carries risks only in Russian jurisdiction – banks impose fees for storing currency, and the Central Bank is doing its best to squeeze it out of the country in order to weaken the ruble, which carries risks for the economy.