Converting DRs of Russian companies not on SDN list into local shares does not contravene sanctions - OFAC

MOSCOW. June 7 (Interfax) - Converting the depositary receipts of Russian companies not included in the specially designated nationals and blocked persons (SDN) list into local Russian shares does not contravene the current sanctions that prohibit United States residents from making new investments in the Russian Federation, according to the corresponding clarification published by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) on Monday.

The ban also does not require the disposal of securities purchased prior to its entry into force, according to the OFAC's updated list of frequently asked questions on the application of sanctions against Russia.

Moreover, acquiring shares in a U.S. fund whose assets include Russian securities would not contravene the sanctions if the Russian securities are not a dominant stake in the portfolio structure. The funds may continue to operate and attract investments from U.S. residents, and have the right to sell Russian securities. Meantime, U.S. residents cannot buy securities of Russian companies, both previously and newly issued, in accordance with the ban on new investments, the OFAC recalled.

The OFAC specifies in the latest clarifications the types of transactions subject to the ban on new investments in Russia. This specifically entails acquiring real estate, except for personal use; forming a joint venture and assuming obligations for capital investments; lending to commercial projects in the Russian Federation; and purchasing shares in Russian legal entities, as well as rights to extract natural resources.