New Capital Market Law is mainly expected to provide better protection for investors, which should come as a result of the formation of a new authority - Investor Protection Fund.
People at the government financial institutions have pompously announced that novelty as the greatest benefit of the Law that came into force on 17 November 2011, assuring the public that the position of investors will improve significantly. On the other hand, financial experts fear that the Fund may be only an empty promise, warning that it may prove difficult to apply the Law.
The role of the Investor Protection Fund is to protect investors whose funds, that is, financial instruments, are exposed to a risk in case of bankruptcy of an investment company or a credit institution. Clients` claims are insured up to the value of EUR 20,000, while the claims of institutional investors and persons connected with investment companies are not insured.
It is mandatory for a company rendering investment services to be a member of the Investor Protection Fund. As it was announced, the Fund should operate as part of the Deposit Insurance Agency.
And while stock exchange officials are still not ready to comment on concrete changes that will be introduced to the Serbian capital market with the formation of the Investor Protection Fund, financial experts do not see this move as a novelty that will significantly change the situation.
Vladan Rankov, project manager at Wise Broker, believes that previous institutes of law were already protecting investors to a satisfying extent.
- Existence of the Investor Protection Fund will protect investors only to an extent to which embezzlements and unprofessional conduct by brokers are possible. However, since there have not been so many negative examples to date, I think that this should be interpreted rather as a positive signal than a real need for protection.
He also stresses that this Fund should not be wrongly considered as an institution that will cover the losses caused by a poor assessment or a bad decision on the stock exchange.
Nenad Gujanicic from the broker company Sinteza Invest Group believes that the biggest changes in the Serbian capital market will be made to the operations of broker companies that have so far been unable to manage cash accounts of their clients.
- They will now offer this option as well, which is a common practice in all normal markets, but the fact that their capitalization is smaller than the one of banks makes it logical to form the Investor Protection Fund to act preventively - Gujanicic says to eKapija.
Vladan Rankov from Wise Broker adds that there have not been any special or positive reactions by investment companies so far.
Investment companies now expect the adoption of bylaws regarding the protection of investors, which should regulate the manner in which the members will be paying a contribution to the Fund in details.
The Law now only reads that the members will be obliged to calculate and pay their contribution to the Fund on a regular basis, and that the amount of contribution will be either fixed or determined on the basis of the percentage of revenues from activities and services. The initial contribution amounts to EUR 5,000.
- Investment companies welcome the Investor Protection Fund as an additional security measure, but the dilemma regarding calculation of the contribution is not resolved yet – says Milivoje Knezevic, head of the Analysis Division at MV Investments.
However, we will not be able to get the real picture until investors give their opinion. Since they are still unable to actually use the services of the Investor Protection Fund, we will have to wait for their opinion based on experience for a while.
Milica Stevuljevic
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