Unfair practice of financial institutions when providing analytical data to their clients

The Bank of Russia calls on financial institutions to follow ethical standards in the course of their interaction with clients when providing data analytics.

The Bank of Russia regards recommendations on actions based on analysis of non-existent data and provided to the clients of financial institutions for further actions, as malpractice, which can potentially affect pricing on the financial market.

The letter with reference to struggling banks, sent by LLC Alfa Capital Management Company to several of its clients in August 2017, is reviewed by the Bank of Russia as an example of the above-mentioned malpractice. This letter gives a negative opinion, stated categorically, which referred to the current state of affairs in issuing credit institutions, and was allegedly grounded on some material public and non-public information held by the above company. As the Bank of Russia subsequently established, the information, contained in this letter, with reference to the company closing its limits for bonds of the banks in question, was untrue; any other material non-public information, inter alia insider information, was not available to Alfa Capital Management Company LLC. The above case has led to the Federal Antimonopoly Service issuing a warning notice on its official website to LLC Alfa Capital Management Company, ordering it to cease actions that might induce breaches of antimonopoly law.

According to Federal Law No. 224-FZ, dated 27 July 2010, ‘On Countering the Misuse of Insider Information and Market Manipulation and Amending Certain Laws of the Russian Federation’, the issuance of the above letter by LLC Alfa Capital Management Company to its clients cannot be treated as market manipulation or unlawful use of insider information.

However, the Bank of Russia deems it necessary that financial institutions discontinue to offer information-related products of this quality to their clients. Investor advice should be based on real results of financial and economic analysis, principles of fair practice and focused on r priorities of a client. This can only be possible if financial institutions exercise control over information addressed to third parties, commit to and comply with principles of professional ethics.

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