Sales of non-bank financial institutions’ products to follow universal scenario requirements

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The Bank of Russia recommends that the sale of financial products and instruments by all financial institutions be based on consumer interaction scenarios (scripts) that meet best practices for consumer rights and interests protection. Such standard scripts for the sale of non-bank financial institutions’ (NFIs) products will fall within the remit of self-regulatory organisations (SROs). This is highlighted in the regulator's information letter signed by Bank of Russia Governor Elvira Nabiullina, addressed to all financial institutions.

The regulator recommends that standard scenarios should ensure the fullest possible information is provided to the consumer about the specifics and risks of a given financial product. At the same time, nothing should suggest the product is forced onto the customer. The seller should definitively specify the duration of the contract and its early termination clauses, while also making the customer aware of the procedure for returning funds in the event the customer decides to withdraw from an executed transaction. It is further recommended that SROs build a separate scenario for each essentially different financial product.

Financial institutions are welcome to independently develop interaction scripts for its in-house use – they should be agreed with the SRO and meet the principles and standards for financial consumer rights and interests protection.  The SRO receiving a sales scenario for a new product to the Russian market should send the relevant information to the Bank of Russia's Service for Consumer Protection and Financial Inclusion, the document sets forth.

We find it unacceptable when the consumer is being misled or when its trust is being abused’, explains Mikhail Mamuta, Head of the BoR’s Service for Consumer Protection and Financial Inclusion. ‘Not only does this create reputational risks for the sector – this may well undermine public trust in the overall financial market. The new scenario requirements are meant to prevent the emergence of such problems’.

Importantly, banks acting as NFI agents are also recommended to use the scenario as guidance for their customer interaction processes. NFIs are recommended against executing agent agreements which lack the clause about the intermediary’s obligation to use SRO-concurred sales scripts as well as that about responsibility for incompliance.

The Bank of Russia directs market participants’ attention to the recommendation that the preferred intermediaries for sales of financial products are non-bank financial institutions or credit institutions (except when otherwise provided by law or approved SRO standards).

The unveiled recommendations feature an approach which is aligned to best global practices in financial markets where the quality of sales and customer interaction is a key element of conduct supervision.

30 November 2018

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