Protecting individuals’ investments held in individual investment accounts: the regulator’s proposals
Proposals detailing the rollout of a guarantee scheme in the securities market which would, on the one hand, protect individuals’ investments held in individual investment accounts and, on the other hand, be acceptable to financial service providers, helping raise public trust in financial instruments and institutes, are discussed in the Bank of Russia's consultation document, released for discussion with all involved parties.
The authors believe this effort is best launched by focusing on investments held in individual investment accounts (IIAs). As it progresses and its operations become increasingly mature, the scheme would be transformed into a holistic programme covering the remaining securities market instruments.
Primarily, the guarantee scheme in the securities market would extend to monetary funds and securities managed by a broker under a brokerage services agreement (by a manager under a trust agreement), as well as to monetary funds received by a broker (manager) under transactions conducted on the basis of a relevant agreement. The guarantee scheme would further extend to monetary funds and securities in respect of which receivables arise for the broker (the broker-appointed manager) or the insured person as a result of the broker’s (the broker-appointed manager's) transactions in accordance with a brokerage agreement (trust agreement) providing for an individual investment account.
The customer would be entitled to compensation in cases of the professional securities market participant going bankrupt, as well as in cases when the insurer is a credit institution and has its Bank of Russia banking licence revoked or a moratorium is imposed on meeting creditor claims.
The maximum claimable sum of insurance indemnity is understood to be within 1.4 million rubles. It will be paid out of an investment insurance fund built up by payments made by professional securities market participants taking part in the guarantee scheme and other revenue. The plan does not envisage public funding of the future investment insurance fund.
The Bank of Russia believes that the proposed steps will be attractive to the domestic retail investor and encourage inflows of private investment into the Russian securities market.
The Bank of Russia welcomes any feedback, including responses to the questions in the consultation document, as well as proposals or comments, before or on 31 December 2017 at: guttakovskiyyaa@cbr.ru.