Bank of Russia establishes requirements for automatic investment advisers
Automatic investment advisers should provide individual recommendations to clients, taking into account their investment profile. At the same time, investors should be informed about the specifics of the preparation of such recommendations and potential risks, as well as about the conditions for their conversion into orders to brokers to make transactions. The corresponding ordinance has been registered by the Ministry of Justice of the Russian Federation.
Special attention is paid to information security. The software should store the history of the activity of the user and the robo-adviser, create logs (reports) on the individual investment recommendations provided. In addition, auto-follow tools are also required to store records of broker orders automatically converted from recommendations. It is also important that the software is protected against unauthorised access and changes in the algorithm of its operations.
The new requirements will come into force on 1 April 2022.
‘Robo-advising technologies are becoming increasingly widespread in the Russian financial market. The Bank of Russia’s regulation will contribute to the further development of innovations and provide additional protection for financial consumers from unfair practices,’ said Mikhail Kovrigin, Director of the Financial Market Strategy Department of the Bank of Russia. ‘However, clients should be aware that the advice received from advisers is not a direct instruction for making transactions in the stock market. Before giving an order to a broker, it is necessary to analyse the recommendation and assess all the risks. If you lack financial knowledge, it is better to stick to trust management.’