The schedule of the Russian parliament has been updated yet again and it appears that forex dealing regulation is coming back to the fray. According to recent reports by Russian media there might be some key amendments aimed to limit the participation of brokers residing in offshore financial centres (OFCs). The revisions have been introduced for consideration of the financial markets committee headed by Natalya Burykina.
Popular Offshore Destinations Not Tolerated
While the committee plans to discuss the proposed amendments to the forex regulation bill, it is worth pointing out that Cyprus has been excluded by lawmakers from the list of OFCs back in January 2013. However entities which are regulated in Malta might have a hard time getting into the Russian market if the amendments are included. Needless to say the list goes on with a full mention of all offshore tax heavens one can think of, and notably includes the United Arab Emirates and Hong Kong. (A full list of the OFCs deemed as offshore can be found by following this link in Russian.)
Another set of proposed amendments touches on the professional qualities of individuals and history of conduct of companies who apply for a forex broker dealer license. The proposal details certain requirements for the founders and shareholders of the companies that can get a license. They have to be completely unrelated (without distinction whether the shareholders are directly or indirectly through controlled entities) to funds engaged in trust management agreements, simple partnerships, errands, shareholders agreements, any other agreements, the subject of which is the exercise of rights certified by shares in a forex dealer company that controls votes relating to stakes in an authorized forex broker dealer.
Additionally the legal entity can not be registered in any of the OFCs that concede information on financial transactions from the Russian government.
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A Clean sheet Is A Must For Regulated Forex Brokers
The next amendment relates to companies that have already been revoked their license for previously conducting any sort of financial services related activity. In addition the draft proposal includes provisions for the business reputation of the professional management teams of the forex broker dealers. This point concerns the members of the board of directors, the collective comprising the executive body and every executive in the company including branch managers, internal comptrollers, risk management professionals and others.
As such, the individuals would have to comply with the following requirements – to have not been in charge of an organization that has violated financial regulations throughout the person’s tenure, or if the organization whose license has been revoked, at least three years need to have passed. Leadership positions at forex brokerages would not be held by individuals who have been administratively punished and disqualified for misconduct in any other company and individuals who have been convicted for economic crimes or crimes against any state authority.
The latter part of the proposed amendments applies to founders and shareholders in forex broker dealer companies as well. To conclude the changes, forex broker dealers regulated in Russia would be obliged to report any changes in their shareholder structure to the Bank of Russia in a set timely manner.
Second Reading Vote Is Imminent
It’s good to know that Russian authorities have not postponed back regulation of the foreign exchange indefinitely after all. The 23rd of April is quite close and if the votes pass, the implementation of these changes are actually addressing some of the concerns that were expressed by Forex Magnates in an earlier detailed report on the state of the regulation of the forex industry in Russia. One of the so-called banking forex companies has been operating from the British Virgin Islands all along, and nobody seemed to care much. Well after all Russian authorities do appear to have taken this into account. However with the broadness of the list of OFCs some decently regulated entities might be shut off from the Russian market.