The Bank of Russia has published its data of non-qualified investors’ knowledge about the trading, disclosing only 28 percent of the investors that passed the market aptitude test for foreign shares by answering all the questions correctly.
The Russian regulator mandated the testing of trading skills with complex financial instruments of all non-qualified investors from October 1. This prompted major regulated brokers in the country to conduct more than 2.5 million tests in the month.
Most of the unqualified investors requested tests on the understanding of ETFs, derivatives risks, Russian bonds without a rating, structured bonds and making margin transactions.
Based on the results, the market supervisor concluded that Russian investors find the understanding of market risks very difficult. However, there is no limit in the number of attempts, meaning the investors can take the tests again if they fail to secure the desired result.
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Moreover, any investor can make the transaction with a limited amount even in the case of failing the test.
“This is a new procedure for the market, and we, together with self-regulatory organizations, will analyze the progress and results of testing, determine the directions for further improvement of this mechanism,” said Mikhail Mamuta, the Head of the Consumer Rights Protection and Financial Inclusion Department at the Bank of Russia (translated from Russian).
Concerns over Unfair Practices
Furthermore, he raised concerns over the testing practices as some brokers reported a very small percentage of positive results from the tests, while others reported almost 80 percent positive results. According to Russian law, the regulator can demand a buyback of the financial instruments for any violation of the testing procedure.
“In the course of ongoing supervision, we will carefully analyze the relevant cases and take the necessary measures in relation to organizations using such practices,” Mamuta added.