Labels and ratings of securities: increasing issuers’ transparency to help investors
Exchanges will be obliged to label shares and bonds of those issuers who limit their disclosures, while credit rating agencies will be required to assign credit and non-credit ratings to them. The Russian Ministry of Justice has registered a Bank of Russia ordinance developed to partially mitigate the problem of issuers withholding information.
It is securities of companies withholding more data than stipulated by Resolutions of the Russian Government No. 1102 and No. 1173 that are subject to labelling. These labels are intended to help institutional and retail investors, marking companies that cannot be monitored and whose financial position cannot be assessed due to insufficient information.
An alternative to labels can be an issuer, its securities, a surety, or a guarantor for such securities having ratings assigned by at least two credit rating agencies. Investors will be able to make their decisions based on the data provided by these agencies, be it a symbolic representation of the analysis results, a brief press release, or a detailed analytical report. Credit ratings are intended for bonds, while shares will be assigned non-credit share ratings. They will serve to partially compensate for the lack of information.
The Bank of Russia believes that the availability of high-quality and accurate information is crucial for maintaining confidence in the financial market, which is why it is important that issuers commit to fully disclosing their data.