Aggregated News From Investment Management Regulators

Better investors’ rights protection ensured when professional participants face conflict of interest

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Professional securities market participants will be prohibited from entering into transactions with a conflict of interest that may damage customers. This includes, for example, transactions with a customer’s property if they are not made on the best terms available, as well as the professional participant’s own operations using information about customers’ transactions.

draft Bank of Russia ordinance that introduces requirements to prevent a conflict of interest has been published for discussion with market participants. Its adoption will improve the protection of investors’ rights and interests.

The draft ordinance establishes cases when a professional participant is allowed to eliminate a conflict of interest only partially. For example, if a contract with a customer contains detailed information about a conflict of interest or if the professional participant acts in the same way as if there were no conflict of interest. However, in that case, the company must take measures to reduce the likelihood of damaging the customer: it should disclose information about the conflict of interest to the investor (if it was not disclosed) and establish ‘Chinese walls’ between the divisions that perform client and proprietary transactions of the professional participant so that they cannot receive information about each other’s operations.

Similar requirements already exist for collective investment entities, non-governmental pension funds, and special depositories.

Suggestions and comments to the draft ordinance are welcome by 16 February 2021 inclusive.

See PDF here: https://www.cbr.ru/StaticHtml/File/41186/210203-38-1.pdf

This news item was originally published by the Central Bank of the Russian Federation (CBR RU). For more information, see the Source Link.

Regulator Information

Abbreviation: CBR
Jurisdiction: Russian Federation

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