Investors are suing due to inaction – Kommersant FM
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Russian investors accuse the regulator of “inaction” on February 24, 2022. Then, against the backdrop of the outbreak of hostilities in Ukraine, the domestic stock market experienced a record drop. On that day at 7:50 a.m., the Bank of Russia first ordered the cancellation of trading on the Moscow Exchange, but resumed it two hours later. Investors are demanding that both decisions of the Central Bank be declared invalid, as follows from the materials of the file of arbitration cases. 16 people went to court. Third parties are the National Clearing Center and the Moscow Exchange.
What are the prospects for the proceedings? “Kommersant FM” discussed this issue with the partner of the NSP law office, Alexander Nektorov, who got acquainted with the claim:
“In this lawsuit, a group of plaintiffs demands that two orders to suspend and resume trading be declared invalid. And the second, main requirement is to recognize as unfair the inaction of the Bank of Russia, which was expressed in the inability to counteract crisis phenomena. And as the basis for this claim, the group of plaintiffs refers to the fact that the regulator, in issuing these orders, acted beyond its powers. Allegedly, according to the law, the Bank of Russia did not have the right to do this. The next reason: the plaintiffs believe that the Central Bank abused its rights. And the last thing is the inconsistency of the regulator’s actions, that is, first it suspended it, and then resumed it two hours later.
I don’t remember such claims, when a group of people brought claims against the Bank of Russia. On the other hand, such events have not occurred over the past few decades. Suing a government organization in Russia is not an easy task. A certain inconsistency in the actions of the regulator is really visible here. On the other hand, this inconsistency of actions can be explained by the complexity of the events that took place. It was necessary to make a decision in a short period of time. It was quite difficult.”
On February 24, trading resumed at 10 am. After this, the stock market suffered historic losses: Moscow Exchange quotes immediately fell by 45%, the RTS index by 50%. However, the site did not close even the next day; the Central Bank decided to suspend its operation only on February 28.
It is not yet clear whether investors are going to seek compensation for losses from the regulator in court. Lawyers note that if successful, the plaintiffs may well demand compensation from the Central Bank. But if the arbitration side takes the applicants’ side, this will be a dangerous precedent, believes Dmitry Alexandrov, managing director of the investment company Ivolga Capital:
“In general, I agree with the arguments of the affected investors. Of course, the most correct decision seemed to be, in principle, not to open trading until the panic subsided. The opening of trading led to the closing of short positions on many securities, and, of course, this immediately led to margin calls and significant losses for a number of clients.
On the other hand, it is still difficult to unequivocally accuse the Central Bank or financial authorities in general of unprofessionalism. This situation only happens once. At that moment, of course, no one knew which decision would be correct. With the same success, you can file lawsuits against the Central Bank because, in the opinion of a number of managers and investors, the key rate is not correct. This already seems absurd.”
One of the 16 plaintiffs already filed a lawsuit against the Central Bank in early September. Among the requirements then was also the recognition of the regulator’s regulations as invalid. However, the application was returned due to the fact that the document was drawn up with violations. Neither the previous nor the current appeal from investors was commented on by the Bank of Russia and the Moscow Exchange.
Everything is clear with us – Telegram channel “Kommersant FM”.
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