Bank of Russia mandates labels for non-disclosing issuers
The Bank of Russia (CBR) has mandated that exchanges label securities of issuers limiting disclosures, with credit rating agencies assigning ratings. This ordinance, registered by the Russian Ministry of Justice, aims to mitigate issues from withheld information.
Mandatory Labels for Limited Disclosures
The CBR has introduced new regulations obliging exchanges to label shares and bonds of issuers who restrict their disclosures.
This ordinance, officially registered by the Russian Ministry of Justice, aims to address the challenge of companies withholding crucial information.
Securities fall under this labelling requirement if their issuers provide less data than mandated by Russian Government Resolutions No. 1102 and No. 1173. These labels are designed to assist both institutional and retail investors by clearly identifying companies whose financial health and operations cannot be adequately monitored or assessed due to insufficient public information.
The measure is intended to enhance investor protection and market integrity by highlighting potential information asymmetry.
The CBR emphasizes that the availability of high-quality and accurate information is crucial for maintaining confidence in the financial market, urging issuers to fully disclose their data.
Ratings Bridge Information Gaps
As an alternative to mandatory labelling, an issuer or its securities can obtain ratings from at least two credit rating agencies.
These ratings can apply to the issuer itself, its securities, or any surety or guarantor associated with them.
Investors can then rely on the data provided by these agencies, whether through symbolic representations, brief press releases, or comprehensive analytical reports.
Specifically, credit ratings will be assigned to bonds, while shares will receive non-credit share ratings.
This mechanism is intended to partially compensate for the absence of complete information, providing a standardized assessment for market participants.
Transparency, Not Revolution
This ordinance represents a crucial step towards fostering greater transparency within the Russian financial market.
While not a complete solution, it empowers investors with clearer signals regarding information-deficient companies.
The Bank of Russia's emphasis on full disclosure underscores a commitment to market confidence, albeit through a mechanism that still allows for partial information.