The “Qualified Investor” Dilemma

20 May 2016

Does the institution of the “qualified investor” offered by the Bank of Russia in the over-the-counter Forex market in Russia create a precedent for challenging the losses suffered by traders? The so-called “charjbeki”, when an unprofitable trader, after scolding about his wrongly assigned status as a qualified trader, through court demands compensation for his losses, reasonably cares for many brokers. This issue was widely discussed at last week’s meeting of the Expert Council on OTC Financial Activity and Protection of Individual Investors Rights under the State Duma Committee on the Financial Market.

Who is a Qualified Investor?

Let’s recall the main provisions of the “Qualified Investor” regime, which the Bank of Russia proposes to introduce as amendments to the Law “On Forex”. So, the main point is: “The conclusion by a forex dealer of contracts with individuals who are not qualified investors is not allowed.” Who is a Qualified Investor? This is someone whose account is at least 6 million rubles, more than two years of experience in the market, higher economic education and he carries out transactions at least once a month, but at least ten times a quarter. That is, the mega-regulator designated three basic qualifications: property, educational, work experience.

At the same time, the main question is, who will qualify the clients of forex dealers?

The Bank of Russia, for its part, proposes that the institute of qualification be entrusted to the (licensed) forex dealers themselves, which in turn generates a conflict of interests and creates the aforementioned precedent for “charjobs” (contesting damages in court). Russian-forex trader Russian average forex trader Courts, charjobks and conflict of interest

Evgeny Rastorguev, a representative of the company Profit Broker, commented on this issue to the meeting participants, including the representatives of the Central Bank: “The draft law says that if the client is wrongly recognized as a qualified investor, the forex dealer must pay damages. That is, immediately there is a conflict of interest. Because the dealer needs to earn money, and for this he will have to recognize as many customers as possible by qualified investors, to let him into the market. I believe that this should be done by an outside organization that conducts educational activity, recognizes the consumer as qualified or not, and the latter already chooses where to go to (to which market). Otherwise, there will be “caregbeki” in this matter too, – it will be unequivocal. Responsibility for the unauthorized recognition of a client by a qualified investor must be removed from a forex dealer “.

Olga Shishlyannikova, Deputy Director of the Department of the Securities Market and the Commodity Market of the Bank of Russia, retorted: “And how does the institution of recognition of qualified investors work in our country and in the West? This is always the broker to which they come for providing the relevant services. The fact that there is a conflict of interests, and I probably agree with this, but it is leveled due to the fact that the requirements of a qualified investor are set at the level of the Law, regulatory acts of the Central Bank and the documents of the broker.It is the broker first of all who must fight the conflict of interests, he must separate those units that deal with the status of a qualified investor, and those units that sell related instruments. And who will be responsible for the unlawful recognition of a qualified investor as a “training organization” (outside party) and what does it have to do with checking the availability of, say, the capital adequacy of the client?

The seal of the Russian Central bank, also known as Bank Rossii, sits on display in Moscow, Russia, on Friday, March 13, 2015. Russia’s central bank lowered its main interest rate in line with most economist forecasts, as stabilizing inflation clears the path to boosting an economy buckling under low oil prices and sanctions over Ukraine.

Photographer: Andrey Rudakov/Bloomberg

The case of a qualified “Kazan trader”

Andrey Zorin, Senior Vice President of Alfa Bank, joined the discussion: “I recall a case of a certain Denis Gromov, a copy manager from Kazan, who also made transactions with foreign exchange instruments at the currency section of the Moscow Stock Exchange. Despite the repeated warnings of the broker Alfa-Bank, he continued to trade, reaching a loss of 15 million rubles and as a result, the bank owed about 9 million. By the way, he is recognized as a qualified investor. What does this mean? The fact that Alfa violated something? Tools not suitable in the market? Or another? Now he owes the bank, and if he traded in the Forex market, he should not have anything. ”

Ms. Shishlyannikova: “I’m not ready to consider a particular case, although, based on the media, in this case the trader clearly did not understand what he was doing.”

The representative of IQ Option Rus (the provider of trading services in the field of binary options), Vladimir Golubev, presented his view: “The forex market is absolutely equal to a financial instrument. In Europe, the client must fill in a certain questionnaire, on the basis of which the instruments, shoulders, etc. are offered. It seems to me that the introduction of the institution of a qualified investor will contradict the Russian civil code and the constitution, which will only entail an increase in the “gray zone” of companies that provide services without a Russian license. “In order to create a regulated forex market and a full-fledged protection of consumers’ rights, Evgeni Masharov proposed the introduction of two legal regimes for working in the forex market, that is, work with both qualified investors and unqualified investors with different conditions (multi-stage classification).

Thus, while representatives of the industry and the regulator did not manage to come to a common denominator, but, apparently, discussions on this issue continue. In addition, the Bank of Russia expressed its readiness to consider any proposals of trade business professionals on the issue of the institution of classification of investors, consumers of trade services in the over-the-counter Forex market.

“We can block websites of foreign banks”

Receding from the previous topic, it is interesting to note the remark of the representative of the Central Bank on the issue of blocking foreign profile sites.

Andrey Zorin, Alfa Bank, asked Ms. Shishlyannikova: “For example, if a foreign bank offers an individual to open a deposit on its website and this site is available on the territory of the Russian Federation, does the Bank of Russia have the right to block this site? After all, this is the same financial service, and many Russian citizens have accounts in foreign banks.

” A representative of the Central Bank answered: “If this bank offers services in Russian, then yes we will offer to block these sites. The main qualifying feature is “the offer is in Russian.”


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