Law eliminating loophole for pseudo-investment schemes and financial pyramids becomes effective
From now on, only companies supervised by the Bank of Russia may publicly raise investment from individuals. These are banks and non-bank financial institutions, including brokers and management companies, as well as other intermediaries engaged in investment raising. The relevant changes have been introduced into the legislation.
Before that, there was no legal framework regulating public investment raising from individuals. Consequently, initiators of pseudo-investment schemes and financial pyramids were capitalising on this loophole offering people to invest in non-existent entities and dubious projects. The innovation will help protect people from these schemes.
In particular, raising investment from individuals, a company must either provide them with securities to be issued according to the laws on the securities market, investment funds and mortgage-backed securities or be entitled to raise investment this way pursuant to law.
The law specifies separately that consumer societies that were often actually concealing financial pyramids will not be allowed to raise funds from individuals if the latter are not unit holders in these societies.
The law does not restrict circulation of digital rights or transactions using financial and crowdfunding platforms.