Bank of Russia enhances investor rights protection in case of conflict of interest between management companies and specialised depositories
The Bank of Russia has approved the requirements for detecting and managing a conflict of interest between management companies (MCs) and specialised depositories. The corresponding ordinance of the regulator was registered by the Russian Ministry of Justice.
The new rules seek to boost the protection of investor rights and legitimate interests, as well as to build trust in the collective investment market.
The ordinance describes cases when a financial institution might encounter a conflict of interest, explains how to identify it and which types of conflicts must be prevented. For example, transactions involving client’s assets that are not conducted on the best terms available and conclusion by the MC of its own transactions based on information on clients’ transactions must be prohibited.
In certain cases, a financial institution is allowed to complete the deal implying a conflict of interest: for example, a deal with its affiliated person. However, it is only possible if the financial institution has ensured that this deal is in line with the client’s interests and that the client has been informed on the conflict of interest.
The requirements will come into effect on 1 April 2020.