New set of regulations detail on the investment opportunities
On July 31st, 2020, the Federal Law on investor categories #306-FZ, extending the range of qualified investors and introducing testing of non-qualified investors to confirm their capability of investing in complex structured instruments and certain foreign securities, was signed by the Russian President. Here are but a few novelties which the newly introduced legislation will put into force in the 2020 – 2022 period:
- starting July 31st, 2020, companies with an annual income (revenue) of at least RUB 30bn or with a net asset value of at least RUB 700mn will be added to the list of qualified investors;
- starting April 01st, 2022, non-qualified individual investors will be required to pass testing arranged by local brokers in order to be able to invest in certain foreign securities, repo agreements, derivatives and structured instruments. The testing will incorporate a list of questions developed by the Bank of Russia and self-regulatory organizations NAUFOR and NFA aimed at evaluating individual investor`s financial awareness and understanding the risks associated with the investment in relevant instruments;
- if an investor does not pass the testing procedure, they will the “right of the last word”, meaning that they may invest up to RUB 100,000 in the desired instruments, provided they were informed on the applicable risks by a broker. The Law also stipulates a list of instruments open for investments by the non-qualified investors, and it includes listed shares, corporate bonds excluding structured bonds, government bonds, mutual funds, and some of the foreign blue chip bonds;
- finally, any broker who violates the testing procedure will be required to buy out the securities acquired by their client, and compensate the said client on any losses incurred in connection with this transaction.
On July 31st, 2020, a set of amendments to the Federal Law on foreign investments in companies of strategic importance for national security # 57-FZ, dated April 29th, 2008, (hereinafter – the “Law”) was adopted. These amendments further elaborate on the definition of control over the companies of strategic importance and the threshold calculation rules in order to clarify that the direct or indirect stakes in such companies, which are transferred by a foreign investor to third parties on a temporary basis, will be observed as belonging to such foreign investor.
Foreign investors acquiring control in companies of strategic importance shall observe the provisions of the Law.