Bank of Russia restricts sale of securities of unfriendly countries to unqualified investors

The Bank of Russia’s latest move will mean that everyday investors from Russia will soon not be able to buy shares in international companies such as Tesla or Netflix, as reported on Tuesday, September 6.

From October 1, the Bank of Russia will restrict the proportion of securities in a portfolio to a maximum of 15% per cent.

From November 1, it will be 10 per cent, from December 1, it will be 5 per cent, and from January 1, 2023 they cannot be purchased at all.

The Russian Central Bank argues that this ban will help unqualified investors to minimise their risks, because foreign financial institutions will be able to block such assets without warning.

The full statement as posted on the website of the Bank of Russia read:

“From 1 November 2022, the threshold for such transactions will be 10% of a client’s portfolio, and from 1 December 5%. ”

“From 1 January 2023, brokers will have to suspend the execution of any order from an unqualified investor to increase a position in securities of foreign issuers from unfriendly countries.”

“This decision is aimed at minimising infrastructural risks for unqualified investors, as foreign financial institutions where such securities are held may, without warning, block the ability to dispose of the assets acquired.”

“More than 5 million investors have already been affected by such blocking. It is very difficult to protect the rights of holders of these securities post-facto, as the solution to the problem lies outside Russian jurisdiction.”

“The order also applies to orders to buy and sell deliverable derivatives whose underlying assets are foreign securities of issuers from unfriendly countries, as well as to orders to conduct transactions to increase short positions on such securities.”

“Restrictions shall not apply to transactions to close short positions, as well as to transactions in foreign securities of Russian companies and issuers from friendly countries.”

“The Bank of Russia will decide on transactions involving securities issued by friendly countries at a later date, taking into account the results of market participants’ efforts to build a custody system without the participation of depositories of unfriendly countries.”

The news comes after the Bank of Russia extended its restrictions on foreign cash withdrawals for another six months, until March 9, 2023 as reported on Monday, August 1.