Request to ring-fence securities prompted by heightened trading activity on news of DR conversion - Central Bank of Russia
MOSCOW. Aug 26 (Interfax) - The Central Bank of Russia has asked depositaries to keep separate records of Russian securities on trustee accounts, the owners of which included unfriendly non-residents after March 1, 2022, due to heightened trading activity by some players following news about the resumption of the reverse conversion of the depository receipts (DR) of Russian companies.
"The Bank of Russia has identified increased activity by individual participants in trading on the exchange against the backdrop of a decision by foreign banks to resume the reverse conversion of depository receipts issued by them. Based on analysis, the Bank of Russia decided to restrict transactions with Russian securities that were recorded in the depository accounts of trustees. The restriction affects only Russian securities transferred from foreign accounting infrastructure, including those received as a result of the reverse conversion of depository receipts, the chain of owners of which included unfriendly non-residents after March 1, 2022," the Central Bank press service told Interfax.
It said restrictions imposed on the depository accounts of trustees managers were similar to those already introduced by presidential decree No. 138.
"In the Bank of Russia's opinion, this measure will ensure fair pricing on the stock market, based on market factors and information about the activities of issuers, and will also safeguard the investments of Russian investors. The Bank of Russia alerts financial market participants and investors to the need for strict compliance with Russian legislation," the press service said.
The Central Bank on August 24 sent depositories a request to maintain separate records of Russian securities owned by hostile non-residents after March 1, 2022, in all trustee depository accounts, depository accounts of foreign authorized holders, and investment partnership depo accounts for shares in Russian companies until December 31, 2024. The document, seen by Interfax, also states that depositories must provide the Central Bank with information on Russian securities for which separate records are maintained on a monthly basis no later than 10 business days from the end of the reporting month.
Bank of New York Mellon , the depository bank, had said that the reverse conversion of DRs into local shares for companies like Gazprom , Federal Grid Company, Cherkizovo Group , RusHydro , Surgutneftegas , Gazprom Neft and others had resumed as of August 22, 2024.
Russian President Vladimir Putin on March 3, 2023 signed Decree No. 138 on additional temporary economic measures related to the circulation of securities, introducing a special procedure for transactions with securities such as shares, bonds, Russian federal loan bonds (OFZ) and unit shares acquired after March 1, 2022, from entities in unfriendly states and credited to an account with a Russian depository.
According to the document, depositories must ring-fence these securities, while the Bank of Russia and the government commission for foreign investments can issue permits for transactions with these securities.