Central Bank of Russia plans to amend depository accounting rules for foreign securities and foreign investors’ rights to Russian securities

The Central Bank of Russia has set out key areas for amending rules on the depository accounting of foreign securities and on recording foreign investors’ rights to Russian securities, following the public discussion of a consultation paper. The package would keep foreign securities’ direct access to Russia’s accounting infrastructure while adding new investor risk disclosures and mechanisms to strengthen portability and transparency of foreign-held Russian positions. Foreign assets would not be restricted to being present in Russia only via Russian depositary receipts, and the procedure for issuing such receipts is intended to be simplified. Depositories would be required to inform clients about risks linked to foreign jurisdictions, including the possibility of restrictions or blocking, and the Bank of Russia plans to define circumstances where domestic accounting institutions would not be liable to depositors, such as foreign sanctions or nationalisation of foreign companies. For foreign investor holdings of Russian securities, the reforms would create conditions for opening segregated accounts so the owner can use and transfer Russian assets to a separate account without the foreign intermediary’s consent, while maintaining disclosure of all owners recorded in an aggregated account where required by law or agreement; refusal by a foreign intermediary to disclose its investors could lead to limits being placed on the rights to securities held in depository accounts. The Central Bank of Russia indicated these measures will form the basis for the concept of the forthcoming regulatory changes.