Residents of Serbia, meaning its citizens, are allowed to trade foreign securities that are permitted by law, but they are required to submit documentation to the bank proving that their trading activities are lawful, according to a statement from the National Bank of Serbia (NBS).
This documentation can include, for instance, a contract with a foreign broker or any other document that confirms which securities the resident will be trading abroad and in what amounts.
The NBS noted that in the past period, there were many instances where residents transferred funds to foreign brokers via payment cards or by issuing orders to their bank, based on a framework agreement with a foreign broker that lacked specific details regarding the planned trading activities. It was only after the funds were returned to Serbia that the residents provided information about trading foreign financial instruments that are not legally permitted.
As a result, post-transaction reporting by residents cannot ensure the legality of such trading, nor can it be expected that residents or individuals will notify the NBS if they have acted contrary to the applicable regulations. The Foreign Exchange Law, last amended in 2018, specifies which foreign securities residents can invest in, while the transfer of funds for purchasing foreign securities is regulated by laws governing cross-border payments.
The NBS emphasized that certain restrictions remain regarding the trading of debt securities. These restrictions apply to securities issued by entities from non-EU countries, as residents are allowed to trade long-term debt securities issued by EU countries or OECD member countries with a long-term credit rating of at least A (according to Standard & Poor’s) or A2 (according to Moody’s). Short-term debt securities issued by third countries can only be traded by banks, not other residents.
Furthermore, residents are still not allowed to freely engage in trading financial derivatives outside regulated markets and multilateral trading platforms abroad, nor are they allowed to trade foreign currencies abroad.
In order to ensure the legality of residents’ foreign trading activities, including those trading through the U.S. broker Interactive Brokers, the NBS requires them to submit documentation when making payments to foreign entities. This ensures that only legally permitted financial instruments will be traded.
The NBS also pointed out that residents may only hold foreign currency abroad in exceptional cases, as prescribed by a special decision, and only with foreign banks. This implies that they cannot transfer funds to their accounts with foreign brokers and hold them there, waiting to decide whether to invest them in specific financial instruments or transfer them back to foreign bank accounts, violating relevant regulations, and use the funds for payments abroad that are not allowed under current laws.
