MinFin allowing for inclusion in exchange mechanism of shares blocked due to sanctions against SPB Exchange

MOSCOW. March 12 (Interfax) - The Russian Finance Ministry considers it justified to extend the exchange mechanism to securities blocked due to sanctions against SPB Exchange and is ready to propose such changes at the next stage, Deputy Finance Minister Ivan Chebeskov said.

"We wanted to see how this process would begin working, how it would all operate in practice. But yes, of course, it is only fair that those shares were blocked on the SPBE exchange should also fall under [this mechanism]," Chebeskov told reporters.

"It's hard to make any predictions on timing now. We need to see how this mechanism will operate now, and then make a proposal for its expansion. To move step by step, as they say. But for our part we are ready to propose the expansion of the mechanism," the deputy minister said.

He added that appropriate changes to the decree should be made to extend the mechanism to securities blocked due to sanctions on the SPB Exchange.

Russian President Vladimir Putin in November 2023 signed Decree No. 844 "On additional temporary measures of economic nature related to the circulation of foreign securities", which creates conditions for the exchange of investors' assets blocked in Russia and abroad. According to it, non-residents may redeem blocked foreign securities of Russian investors via funds on their type-C accounts. According to the decree, only foreign securities that are registered in the accounts of the National Settlement Depository (NSD) may be presented for redemption.

The Russian Finance Ministry said on Monday that the government commission for monitoring foreign investments has appointed the Investment Chamber as the organizer of the exchange of blocked assets. Russian investors through their brokers, trustees or management companies of mutual investment funds can send bids for the sale of securities with an aggregate initial value not exceeding 100,000 rubles.

Bids from Russian investors for participation in the exchange will be accepted from March 25 to May 8, while bids from non-residents will be accepted from June 3 to July 5. Settlements within the framework of the asset exchange should take place on July 29.

SPB Bank said on Monday that it is in talks with the authorities on inclusion of foreign securities blocked due to sanctions against SPB Exchange in the exchange procedure.

The US Treasury Department's Office of Foreign Assets Control (OFAC) placed SPB Exchange on its sanctions list on November 2, 2023, while SPB Bank was added on February 23, 2024.

Following the imposition of US sanctions, trading in foreign securities on the SPB Exchange was suspended and investors' assets were blocked. As the exchange explained, foreign counterparties, including those from friendly jurisdictions, suspended interaction with the trading platform due to fears of liability for violation of the US sanctions regime, including the application of secondary sanctions.

In early January, SPB Bank, which holds foreign securities and foreign FX cash for traders and their clients, submitted an asset unblocking strategy to OFAC. It reportedly included, among other things, removing SPB Bank from the control of SPB Exchange by reducing its stake in its authorized capital and issuing a license to unblock client assets. U.S. sanctions on the exchange resulted in the blocking of securities worth about $3 billion.