Russia restricts retail investors’ access to foreign shares

Russia will gradually limit private investors’ access to foreign shares issued by companies from designated “unfriendly” countries, the central bank said on Tuesday, citing the need to minimise investors’ risks.

The move comes months after sweeping western sanctions, imposed to punish Moscow for its actions in Ukraine, led to the freezing of some of the foreign securities held by investors in Russia.

Brokerages will, from Oct. 1, stop executing orders from non-qualified investors to buy securities in countries that sanctioned Russia if their stake in an investor’s portfolio exceeds 15%, the central bank said.

This ceiling for non-qualified investors will be lowered to 10% from Nov. 1 and to 5% from Dec. 1.

“From Jan. 1, 2023, brokerages will have to suspend the execution of any order from a non-qualified investor to increase a position in securities of foreign issuers from unfriendly countries,” the central bank said in a statement.

Shares in Russia’s SPB Exchange, which specialises in foreign securities, fell by around 5% after the news, underperforming the benchmark MOEX index that was 2.5% higher in early afternoon trading.

The asset freeze linked to the sanctions affects not only wealthy investors but more than five million people who bought foreign shares during a retail investment boom at the height of the COVID-19 pandemic, according to central bank data.

“It is very difficult to protect the rights of the holders of these securities post factum, as the solution to the problem lies outside the Russian jurisdiction,” the central bank said.

Russians held around $14 billion in U.S.-listed shares as of the end of March, the central bank has said previously. It estimates that sanctions on Russia’s National Settlement Depository froze access to around 320 billion roubles ($5.26 billion) in foreign shares.

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