After Thursday’s shocking news that the Bank of Russia took away the licenses of all firms that are not bank subsidiaries, on Friday none other but the spokesperson of President Vladimir Putin has highlighted the power of the Russian financial mega-regulator.
Dmitry Peskov stated that the move to suspend the license of five forex dealers was within the Russian regulator’s competency. The Association of Forex Dealers (AFD) on Friday published a statement that it is suspending the membership of the five brokers in question.
To remind our readers, those are Alpari, Forex Club, TeleTrade, Fix Trade, and Trustforex. The qualifications of the directors of the firms have also been revoked.
The unprecedented action of the Russian central bank comes only a little over two years after the official introduction of the regulatory framework in Russia. According to some details provided by the Russian financial mega-regulator on Friday, the rationale is systemic relocation of clients to offshore jurisdictions.
The AFD states that the rationale behind the decision of the Russian central bank is still not fully available. “In accordance with the current law, the decisions of the Bank of Russia can be disputed in court,” the self-regulatory organization stated.
This is precisely what Alpari decided to do yesterday hours after the decision of the Bank of Russia got publicized. Thursdayesterday’s dramatic actions of the Russian financial mega-regulator seem to be well coordinated with the Finance Ministry of Russia. According to data made public on Friday, the five brokers held close to $500,000, which is around 3.7 percent of the total amount of deposits held at regulated Russian forex dealers. The data was provided by a senior Bank of Russia Official earlier today.
Get Paid to Learn about Cryptocurrency TradingGo to article >>
Despite the limitations of the regulatory framework, the Bank of Russia highlights that aggressive advertising coupled with a flight of clients offshore as directed by their brokers led to its move.
According to the Bank of Russia, the brokers had a total of 2,000 clients. Only 470 of those were designated as “active.” The clients of the brokers are said to have lost their money too quickly in the views of the regulator.
The remaining three forex dealers are said to have close to 4,000 clients. Recently, the central bank also granted a license to a fourth company – Alfa Forex.
“We are going to take measures to prevent offshore brokers from attracting more clients from Russia,” said another official of the Russian central bank.
According to the Finance Ministry, there are no market risks associated with the Bank of Russia ’s move. “If the central bank canceled the licenses of these companies, its decision is justified,” said deputy finance minister Moysee.
Ironically, the Federal Anti-Monopoly Service will be limiting the attempts of unlicensed brokers to advertise their services in Russia. There are still no details how the authorities are planning to enforce these decisions.