SPB Exchange agrees on strategy to unblock clients' assets
MOSCOW. Dec 19 (Interfax) - The settlement depository of the St. Petersburg Exchange, which accounts for the foreign securities and funds in foreign currency of its trading participants and their clients, is preparing a request to OFAC proposing mechanisms for unlocking the assets of its clients.
The trading platform said that SPB Bank would propose it be removed from control of the sanctioned St. Petersburg Exchange by means of a reduction of its share in the exchange's charter capital, and it would further clarify the OFAC general license to extend its validity to its trading participants' clients and extend its term. The proposals also include OFAC issuing a special license or a new general license to unlock the assets of its bidders' clients.
OFAC (Office of Foreign Assets Control, the division of the US Treasury Department responsible for sanctions enforcement) added the St. Petersburg Exchange to its sanctions list on November 2. After this, trading in foreign securities was suspended. OFAC also issued a license to the SPB Exchange requiring it to wind down its operations by January 31, 2024.
The timing of the implementation of the strategy is not related to the expiration of the license on January 31, 2024, and will depend on OFAC and what final unlocking mechanism is agreed upon, the St. Petersburg Exchange said.
Trading participants and their clients have the right to apply to OFAC independently to obtain individual special permission to withdraw their foreign assets from St. Petersburg Bank to other non-sanctioned depositories, the exchange said. This process can occur simultaneously with the strategy that St. Petersburg Bank is implementing.
After the introduction of sanctions, foreign counterparties suspended interaction with the trading platform, fearing liability for violating U.S. sanctions, which could result in the application of secondary sanctions. These risks are considered equally by all foreign counterparties, including those from friendly jurisdictions, the exchange said.
The report notes that during the negotiations, American counterparties and counterparties with connections to the United States (U.S. nexus) confirmed that they are not ready to be guided by the current OFAC general license. In their opinion, it does not cover transactions involving the withdrawal of assets by trading participants and their clients, so their unblocking is impossible without additional clarification from OFAC.
St. Petersburg Bank accounted for American securities in various foreign depositories using the unmarked accounting method, its lawyers said on a special website about unlocking investor assets. This means that it is impossible for SPB Bank to establish a chain of custody for the assets for an individual client. At the same time, final accounting of almost all blocked assets was done by the US central depository, DTC. When applying for an individual license, naming DTC as the final location of assets should be sufficient, the lawyers said. In the event of requests from OFAC, SPB Bank intends to cooperate and provide information it has on the procedure for storing blocked assets.