The state Duma adopted in the second reading the draft law on the protection of unskilled retail investors

The bill, developed with the active participation of the Bank of Russia, forms the framework for the comprehensive protection of rights and interests of retail investors. It allows beginners in the financial market to make trades that meet their needs, knowledge, experience, skills and financial situation.

The bill provides for two categories — unskilled and skilled investors.

A qualified investor will be able to continue to work in the financial market as usual.

Unskilled investor can test to acquire the most simple and least risky instruments such as equities included in the quotation lists, the state securities of the Russian Federation (OFZ) bonds of Russian issuers with a certain level of credit rating and investment shares of exchange-traded, open-end and interval mutual Funds and foreign securities that meet certain criteria (subject to disclosure).

For the purchase of other instruments of committing marginal transactions and transactions with derivative financial instruments professional market participants will have to conduct testing of the unskilled investor in understanding the respective instrument and the related risks. Unskilled investor who fails the test will be able to use the “last words” to perform the desired transaction in the amount not exceeding 100 thousand rubles (or in the amount of one lot, if the price exceeds 100 thousand rubles). However, he in any case should be informed about possible risks.

Testing should organize professional market participants for the rules to be enshrined in the basic standards for the protection of investors ‘ rights. The requirements for such basic standards set by the Bank of Russia.

Violating the procedure for professional market participants will reimburse any losses and expenses incurred, and, if necessary, will have to redeem the purchase of his client’s financial instrument.

Will retain its status as qualified investors, who received it before the law came into force. In addition, if prior to the effective date of the new law in force, the investor has committed similar transaction testing may be waived.

The law, when enacted, will come into force from April 1, 2022, so financial market participants will have sufficient time to prepare for the new regulation.

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