Bank of Russia limits speculative transactions in stock market to maintain financial stability
The Bank of Russia has recently revealed that some brokers are offering to their clients to buy securities from non-residents in foreign jurisdictions promising to transfer such assets to Russian depositories.
The regulator draws investors’ attention to the risks they will be exposed to if they get involved in the transactions offered by brokers. Investors will be unable to dispose of the purchased securities at their own discretion. Moreover, there is no guarantee that they will have the financial result they expect.
When advertising such services, brokers should disclose to their clients all risks arising from the purchase of securities abroad from non-residents representing hostile countries. Anyway, depositories and brokers should transact in securities in compliance with the Russian laws and executive orders of the Russian President. That is why the Bank of Russia recommends that compliance procedures include an analysis of securities’ purchase dates and a verification of counterparties.
Also, the Bank of Russia has introduced additional restrictions to prevent speculative operations and their negative impact on Russian prices. For instance, depositories and registrars will not be able to transact in securities transferred from foreign depository or custodian accounts within six months other than those purchased prior to 1 March 2022. Such six-month lock-up period is also applicable to securities bought by non-residents from friendly countries and controlled foreign companies (save for residents of the Republic of Belarus) from other non-residents in the period from 25 June 2022 to the date when a
The Bank of Russia makes it clear that the said restrictions are inapplicable to the shares obtained by an investor as a result of the cancellation of depositary receipts provided the investor was holding them before 1 March 2022. The novel restrictions will not apply to shares arising from the execution of a securities loan agreement or the second leg of a repo if the first leg provides for a transfer of depositary receipts proving the title to such shares. Other exemptions are transactions authorised by the Government Commission on Monitoring Foreign Investment in the Russian Federation.