units, levels, inflation expectations, market-making, economic, information, securities, economic activity, FPS, reputation, recommendations

Bank of Russia centralises regulation and supervision of infrastructure providers and investment finance intermediaries

The Bank of Russia has established the Financial Market Infrastructure Department (FMID) and the Investment Finance Intermediation Department (IFID) to start their work on 1 June.

Infrastructure providers are becoming increasingly important since they render hi-tech financial services not only to professional market participants, but also to their clients. This is the reason why it is crucial to streamline infrastructure regulation and supervision approaches. The new department will be in charge of the majority of financial market infrastructure providers, including platform-based services.

The Financial Market Infrastructure Department will be based on the Securities Market and Commodity Market Department. It will regulate and supervise the central depository, the central counterparty, registrars, depositories, repositories, clearing houses, exchanges, pricing centres, and commodity supply operators.

The FMID will also be in charge of credit rating agencies, crowdfunding market players — investment platform operators, and specialised depositories.

In the future, its scope of competence will also comprise new infrastructure providers whose operations will be regulated by a new legal framework that is currently being devised. Specifically, these are marketplace operators and the financial transaction registrar.

As regards the Investment Finance Intermediation Department, it will enhance the efficiency of regulation and supervision in the markets characterised by a massive inflow of retail investors in recent years.

Today, financial institutions legally engaged in various activities often offer their clients investment products that are similar in terms of their economic essence and range of risks. The same is true for products that are most requested by retail clients. Thus, management companies offer trust management services both for unit investment funds and within standard strategies under individual trust management agreements (including with the use of individual investment accounts). However, these activities are currently regulated by different departments of the Bank of Russia.

The concentration of competences within the same department will help to better streamline requirements for financial intermediaries providing investment services, ensure compliance with the uniform supervision principles, and optimise the regulation and supervision burden for financial market participants.

The IFID will be based on the Collective Investment and Trust Management Department. Beginning on 1 June, it will be in charge of professional securities market participants that are currently supervised by the Securities Market and Commodity Market Department, including brokers, dealers, forex dealers, trustees, and investment advisers. The IFID will also regulate and supervise non-governmental pension funds, the Pension Fund of the Russian Federation (as regards funded pension investment), management companies, joint-stock investment funds, and agents for the issuance, redemption and exchange of investment units.

Was this post helpful?