Aggregated News From Investment Management Regulators

Sale of compound instruments to non-qualified investors: Bank of Russia recommendations


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The Bank of Russia recommends that securities market participants and banks acting as their agents refrain, until the launch of mandatory testing, from the sale of compound and high-risk financial instruments to non-qualified retail investors without appropriate experience in such instruments.

According to the regulator’s monitoring data, various bonds are now being actively marketed to individual  customers with the amount of yield dependent on specific circumstances (e.g. change in the price of several underlying assets), other compound / structured instruments or combined products providing for the sale of an investment product concurrent with the execution of a bank deposit agreement.

In many such cases, financial intermediaries are knowingly misleading customers, supplying distorted information about product properties and the consequences its purchase or pre-term sale will entail. In this way, investment products are taking the place of savings products notwithstanding customers’ risk profile and investment objectives.

The Bank of Russia believes it intolerable to offer to consumers who have no relevant expertise or investment experience compound investment products with high investment risk or those with a complicated yield calculation procedure, or products with leverage or a foreign component.

The list of products non-recommended for sale to non-qualified investors includes derivatives and compound bonds, as well as trust management strategies assuming investment in the above products, margin transactions (leverage trading) and combined deposits.

See PDF here:

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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