Securities market: Bank of Russia lays groundwork to bring switch to proportionate regulation closer

Photo: Andrii Zhezhera / shutterstock

The Bank of Russia has released an ordinance which sets forth indicators enabling conditional classification of professional securities market participants as small, middle-sized and major ones. The passing of this regulatory act marks the first step in the implementation of the regulator-approved concept and roadmap for proportionate regulation and supervision of non-bank financial institutions.

Professional participants are classed into categories on the basis of the following simple criteria: the volume of broker / trust management transactions, the number of customers as per brokerage / trust management contracts, the cost of securities recorded in depository accounts and the number of persons with personal accounts in the securities registrar. This minimal set of criteria will enable professional participants themselves to select a category they belong, selecting optimal regulatory compliance for their business.

This regulatory act goes as far as introducing initial differentiations based on both licence type and the volume of business. Under new regulations effective from 1 October 2020, internal audit will only be the responsibility of major professional participants. Also, only major registrars will be obliged to form a board of directors and secure regional presence. Equally, the minimal qualified headcount requirements for depositories will be differentiated subject to their selected category.

‘When drawing up regulatory acts covering professional market participants, we now have the opportunity to roll out elements of proportionate regulation’, notes Larisa Selyutina, Director, the Securities Market and Commodity Market Department. ‘We are planning to use this approach in future as regards the requirements and deadlines for the submission of professional participants’ reports. Subsequently, following feasibility studies, internal controls requirements may also be differentiated, as well as risk governance, business continuity and corporate governance requirements.’

Key provisions of the ordinance enter into force 10 days after its official publication.

6 February 2019

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