Market Profiles

RBC IS operates an omnibus account structure in this market.

For further information or support around accessing this market, please contact your RBC IS representative.

Moscow Exchange

Moscow Exchange (PJSC Moscow Exchange MICEX-RTS), is the largest Russian exchange. On December 19, 2011 the Moscow Interbank Currency Exchange (MICEX) and Russian Trading System Stock Exchange (RTS) have formally completed their merger to create a unified stock exchange called MICEX-RTS. The stock market of the united stock exchange comprise of the following market segments:

• Equity Capital Market (T+ Market). Offers trading in shares, depositary receipts, fund shares, ISUs, and ETFs, as well as OFZs and regional and corporate bonds. The T+ Market is based on trading with a central counterparty, partial collateral and deferred execution. Trades executed in the Main Trading Mode T+ (T+2 order book) are settled  under T+2 settlement cycle.
• Debt Capital Market (T0, T+1 Market). Offers trading in OFZs (settled on T+1 with partial collateral), corporate bonds (including commercial papers), regional bonds, and municipal bonds. The T0 Market is based on trading with a central counterparty and full (100%) prefunding. Trades executed in the Main Trading Mode are settled on the same day as the trade is conducted (T+0).

Trading is held electronically in a trading system, to which regional floors and remote terminals are connected. National Clearing Centre (NCC) performs clearing function with regard to both T+ and T0 markets. National Clearing Centre (NCC) also acts as the central counterparty (CCP) to the trades executed in the Main Market sector on the terms of advance depositing of assets (in the relevant portion depending on the settlement cycle) with settlement on the trade day. Settlement for both cash and securities are affected via the National Settlement Depository. The trading and settlement currency is rouble (RUB). It is also the major stock exchange for currency, Federal Loan Bonds (OFZ), and derivatives.

Saint Petersburg Stock Exchange (SPBEX)
Saint Petersburg Currency Exchange (SPCEX)

In addition to these, there are also several regional exchange centers (RECs) that are Moscow Exchange subsidiaries.

Moscow Exchange is a fully electronic exchange providing trading support across equities, fixed income, derivatives and currency markets. The MICEX electronic trading system is able to support parallel interactive trading of a wide range of different financial instruments which is either order-driven or quote-driven. It keeps cash and financial instruments positions in real time and enables dissemination of external information, real-time position keeping and allows electronic broker systems to connect to it and exchange information with it in real-time.
Foreign investors cannot trade on Russian organised stock exchanges directly, but need to have a dedicated Brokerage Services Agreement with a licensed Russian broker.

Moscow Exchange

ISIN (International Securities Identification Numbering): Yes for most securities, however they are not mandatory.

Other: CFI codes are assigned to non-Russian securities. CFI codes are also assigned to domestic securities. A correct CFI code has to be allocated to a foreign security in order to be accepted under custody by a local depository / custodian.
State Registration Number: local state registration numbers are assigned to all securities.

Central Bank of Russia (CBR): CBR is responsible for the supervision of all banking operations, registering new shares for banks and performing banking activities as well as professional activities in the financial markets. CBR establishes clearing and currency control procedures.

The Bank of Russia became a “mega-regulator” of Russian financial market and now performs the following functions:

• Regulation of securities issuance and trading, including state registration of securities issues, including prospectuses where required, and reports on the results of securities placements;
• Control and supervision of the activities of issuers, professional market participants and their Self-Regulatory Organisations; investment funds; management companies for investment funds, non-government pension funds and their Self-Regulatory Organisations; special depositaries for investment funds and non-government pension funds; managers of mortgage coverage; special depositaries for mortgage covers; non-government pension funds; the Russian Federation Pension Fund; the State management company; stock and commodity exchanges;
• Introducing to the Federal Government proposals on improvement of existing laws and regulations on securities market and development of draft laws and regulations;
• Ensures reporting and information disclosure obligations in accordance with Russian legislation;
• Licensing of various securities market professional participants such as brokers, stock and commodity exchanges, registrars, custodians (depositories) and asset managers.

Federal Anti-Monopoly Service (FAS): cooperates with CBR in fields of supervision and control of securities market and maintenance of competition between market participants.

The Ministry of Finance: The Ministry of Finance is an executive body responsible for implementing government policy and coordinating activities in the field of other federal bodies of executive power, in particular in financial sphere, securities market. The Ministry of Finance in Russia performs a variety of functions, which include preparation of budgets, management of public debt, fiscal reforms, tax imposition, accounts and audit activities, financial regulations, and other services. The Ministry of Finance is the regulator developing taxation legislation and is authorised to provide official clarifications and interpretation of the Russian tax legislation.. 

The Federal Tax Service of Russia: the federal executive body involved in the collection of taxes and the implementation of tax legislation and reporting to the internal revenue.

All equities are in registered form. Equities are issued by Russian companies in dematerialised form and share ownership is evidenced by entry in the registrar/custodian books.

The majority of all financial instruments are held in dematerialised form, though there are some physical securities in circulation (e.g., Promissory Notes).

For equities, the minimum price variation unit is RUB 0,01.

A broker is not entitled to execute a margin and (or) unsecured transaction to sell securities at a price 3% below the closing price of a stock on the previous business day. In addition, it is possible to strike margin and (or) unsecured transactions at a price 3% below the closing price if such transactions trigger upside on the securities market. In line with the effective statutory guideline, margin and (or) unsecured transactions are prohibited if the price of a respective transaction is 5% or more below the closing price. 

Please note that foreign investors cannot trade on Russian organised stock exchanges directly, but need to have a dedicated Brokerage Services Agreement with a licensed Russian broker. Thus, local restrictions to brokers are not directly addressed to foreign investors.

For OTC trades settled on the DVP basis via CSD settlement tolerance in the amount of USD 25 /RUB 800 can be applied. Purchase and Sale Agreements are mandatory for local market participants (mainly for the accounting purposes). The PSA or an alternative trade confirmation usually contains the following clauses:

• Price;
• Trade date;
• Total consideration;
• Counterparty information ( cash and custody account details);

Party responsible for the initiation of re-registration. (for PSAs on equities only with regard to CSD ineligible securities).

RUB, USD & EUR

All issues of MinFin bonds have been redeemed. They are no longer in circulation.

Book-Entry: 
Equities: the buyer and seller typically negotiate their own delivery and payment conditions, which may be set out in a Purchase and Sales Agreement (PSA). The true trade date must be communicated at the time of trading. The PSA may specify the trade date, price, amount, expiry date, transaction type and counterparty details. If one or both parties to the trade is a local resident the conclusion of a trade (concluded electronically or by phone) must be followed by signing a PSA in original form. 

There is no unique single format for PSAs. Change of ownership does not occur on trade date and is only recognised once the purchaser or nominee name has been recorded in the shareholder register, or from the seller’s account to the buyer's account if the trade is settled as a book entry transfer on the books of a custodian.

For the OTC trades is settled at NSD with payment being either made off-shore in a hard currency (e.g. USD), or processed at NSD. It is possible to negotiate a “delivery-before-payment” facility with brokers to minimise counterparty risk, but this must be arranged by the investor with their broker and pre-arranged with their global custodian. Settlement occurs at the condition that both parties have sufficient positions within NSD. In order to settle a trade both parties have to submit counter instructions to NSD following bi-lateral pre-matching. The matching of instructions is performed by NSD and is treated as binding, i.e. instructions cannot be unilaterally cancelled once matched. DVP trades may settle in 9 intraday clearing sessions observed by NSD. Settlements are available in RUB, USD currencies in BIS 1, BIS 2 and BIS 3 models; as a standard practice BIS 2 is applied (net securities, gross cash).

For OTC trades the settlement date acts more as a guideline than a contractual agreement. The actual delivery time is affected significantly by the ability of the broker to accumulate a sufficient amount of shares to fulfil the contract, and the location of the registrar where the transfer of ownership will take place (for CSD-ineligible securities).

At the CSD level as well as for the case when both counterparties have accounts opened with the same custodian (the same nominee name), the securities transfer can be executed within one business day upon receipt of the correct instructions from both parties.

Equities traded on Moscow Exchange are settled in the books of NSD, Russia’s CSD. Cash is prefunded in roubles and the settlement cycle is T+2 (for equities) or T+0 (for corporate bonds) and T+1 for OFZs. 

In respect of OTC trades investors should specify in their settlement instruction the place of deposit of the securities, the PSET where the trade concluded is to be settled, in particular the NSD for CSD-eligible securities, and the counterparty details including name of counterparty, its local agent and the account. 

Fixed Income: GKOs (currently not in circulation), OFZs and most corporate bonds as well as regional and municipal bonds are traded on the Moscow Exchange. The NSD is the settlement depository and the cash clearer for trades with bonds. Trades on Moscow Exchange are settled on a T+0 basis, i.e. settlement takes place on trade date. Delivery versus payment in roubles is mandatory for settlement on Moscow Exchange.

Moscow Exchange implemented T+1 order-driven trading and settlement with partial collateral requirement for OFZs. T+0 is still possible for on-exchange Negotiated Trades with 100% collateral requirement.

All securities in the NSD are held in dematerialised form. All OFZ and CBR bonds are held immobilized through global certificates within the NSD (Russian CSD) as it is the official depository for these instruments

Physical: Not applicable

Currently short selling in the Russian market is subject to marginal trading. At the same time, only a limited number of professional market participants may provide this service due to complexity of local legislation in this respect. Private investors will also need to sign corresponding agreements with a Russian broker.

For equities turnaround trades do not currently occur within the market due to the lack of a centralised depository / clearing agent . If a buyer and seller are both customers of the same custodian which has a nominee account in a registrar/CSD, settlement happens on the books of the custodian and turnarounds become possible.

The National Clearing Center (“NCC”) is a separate corporate entity established for the purposes of acting as a clearing organisation. Currently NCC also acts as the central counterparty in the financial market. NCC holds a permanent license to perform clearing services issued by the Federal Service for the Financial Markets and a banking license issued by Central Bank of Russia. Since December 2007, NCC has been providing clearing services in the MOEX Group’s FX market, since November 2011 – in its securities market and since December 2012 – in derivatives market. 

As central counterparty, NCC assumes the risks under the transactions effected between the participants during the on-exchange trading process, acting as intermediary between the parties: i.e. as the seller for each buyer and as the buyer for each seller, which so replace their contractual relations with each other with relevant contracts with the central counterparty.
The main function of NCC is to maintain stability in the serviced financial market segments through implementation of the state-of-the-art risk management system conforming to the international standards and provision to the participants of such clearing services which would enable efficient use of the allocated funds.
By using services rendered by NCC as clearing organisation and central counterparty, NCC also provides additional services:

• NCC guarantees performance of obligations to each non-defaulting participant under the transactions concluded with the latter, irrespectively of how other market participants perform their obligations;
• NCC spares participants from the need to assess risks and set limits for each other, since the participants only assess the risks of NCC as central counterparty;
• NCC’s clearing service with partial margin posting, as well as the netting performed by the bank, enable the participants to use their financial assets more efficiently and cut transaction costs.

Settlement under clearing results is performed in course of trading sessions, as well as after the trading sessions. For this purpose NCC calculates the obligations of clearing participants with the same value date and includes them into the clearing pool. Where the terms of transactions allow for netting, net obligations are being calculated. NCC checks the sufficiency of collateral deposited by clearing participants for settlement, as well as the sufficiency of assets to be deposited into guarantee funds. Should the final net obligation of a particular clearing participant be not fully covered by sufficient assets for proper performance, such clearing participant is regarded as the defaulting clearing participant and becomes subject to penalties.
NSD performs settlement under the on-exchange trades based on the orders of NCC.
For the purposes of proper settlement the following timelines need to be observed by clearing participants:

• Margin calls to be satisfied by 17:30 Moscow time on the date margin calls arise;
• Sufficient assets need to be deposited on the relevant trading accounts by 16:00 Moscow time on the settlement date under “T+” transactions concluded before the said time;

Final clearing under net obligations is performed by NCC at 19:00 – 19:30 Moscow time of the settlement date.

Russian Depository System consists of a number of institutions performing depository activities (custodians and depositories) and registrars of owners and nominee holders of securities. Russian legislation does not distinguish between depository and custody activities. If the participant obtains the depository license, it can operate in the market as a custodian or depository.

According to the Russian Legislation, depositary activity means rendering of services in the custody of certificates of securities, and/or the record-keeping of securities and the transfer of rights to them.

A professional securities market-maker engaged in depository activity is called a depositary. A depositary making settlements on the basis of the results of transactions made during the public sale held by trade promoters in agreement with such trade promoters and/or with clearing organisations engaged in clearing of such transactions is called a settlement depositary.

The depository usually performs the following functions: safekeeping, record keeping, settlement, corporate actions, proxy voting, dividend / coupon processing and distribution, including tax agent functions, informational support etc.

On January 1, 2012, the Federal Law #414-FZ «On the Central Securities Depository» (CSD Law) was introduced which formed the legal framework for creation of a Central Securities Depository (CSD) in November 2012.

National Settlement Depository (NSD) - the merger of the National Depository Center (NDC) and the Moscow Interbank Currency Exchange (MICEX) Settlement House was finalised on November 3, 2010. As a result of the merger a new company called the National Settlement Depository (NSD) has been established as a non-banking credit institution. The NSD is combining both securities and cash settlement activities. Acts as the mandatory settlement depository OFZs and the settlement depository for other securities traded on Moscow Exchange. NSD also supports FOP and DVP settlement facilities for OTC transactions.

Creation of the CSD
On December 7, 2011 President Medvedev enacted the Federal Law “On the Central Securities Depository” (CSD Law) which was approved respectively by the State Duma and the Federation Council, on November 17 and November 29 2011. 

Legal Status and Requirements to be a CSD:
The CSD Law establishes the particular legal status of the central securities depository. According to the law, a CSD may be any joint-stock company, which is a non-banking credit institution duly authorised to conduct depository activities in the securities market, and which has been acting as a settlement depository for at least three years. The CSD law provides only for one CSD eligible to operate in the market.

The CSD is entitled to perform the following activities:

• to open depo accounts for:
  • securities holders;
  • securities trustees;
  • nominee holders performing custody activities;
  • foreign nominee holders – organisations, included in the list of foreign organizations in the name of which the central securities depository may open foreign nominee securities accounts, as approved by the Russian federal executive authority in charge of financial markets
  • to open depo accounts for clearing purposes.
• to provide storage of global certificates.

Also, the CSD may perform additional functions (if the legislation does not provide appropriate limitations):

• clearing activity;
• disclosure information on corporate actions;
• assigning international identification codes for securities (numbering agency);
• banking operations and transactions.
• corporate information data centre.

Main features of CSD Model:

• Single CSD in the market;
• Centralised system for handling of the selected securities;
• Exclusive right to open CSD nominee accounts with registrars for the CSD-only securities;
• Single entry point for most disclosures of beneficial owners.

BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Committee on Payments and Market Infrastructures (CPMI) uses three common structural approaches, or models, to categorise the links between delivery and payment in a securities settlement system.

BIS Model 3 applies - Simultaneous Net Settlement of Securities and Funds Transfers for MOEX. NCC as a clearing agent instructs securities and cash transfers at the same time.

OTC DVP trades are mainly settled at NSD under BIS Model 2, however BIS 1 and 3 models are also possible subject to relevant instruction.

Book-Entry: A unique feature of the Russian equity market is that ownership is not transferred to the buyer on trade date. Only upon the completion of the registration process is ownership passed on. Ownership is noted in the registrar’s records, records of the CSD or of the custodian , and can be confirmed and evidenced by the possession of an ‘extract’ which demonstrates that a certain number of securities are recorded in the registrar’s or custodian’s records as belonging to the owner at that point in time. Extracts are non-negotiable, hold no intrinsic value but do legally prove ownership. 

CSD and foreign nominee concept

The CSD Law has established the CSD nominee accounts with most of the registrars recording CSD-only shares. 

It is impossible to deposit securities into regular nominee accounts of custodians with the registrars (except those resulting in course of corporate actions processing, e.g. conversion or distribution of shares among shareholders).

Although it is still possible to safekeep CSD-only shares on regular nominee accounts of custodians in the registrars; however, transfers of such securities with change of beneficial ownership are possible only between accounts of two owners maintaining direct accounts with the registrar.

A special order is introduced in regard to the procedure for performing transactions in correspondence with the CSD nominee account of the CSD. Main specifics are as follows:

• Deposit of securities to the CSD nominee account (withdrawal from the CSD nominee account) in the register of shareholders is effected on the basis of matched instructions submitted by both the holder of record and the CSD;
• When securities are deposited into the CSD nominee account (withdrawn from the CSD nominee account) in the share register, the change of ownership cannot take place;
• Any transfer made on the CSD nominee account at a registrar is deemed final only upon a successful reconciliation of balances between the registrar and the CSD. In case of any discrepancies corrections are made by the registrar only with the CSD’s consent.

Therefore, the major changes that are connected with the passing of the CSD Law are as follows:

• impossibility to deposit CSD-only shares into regular nominee accounts of custodians in registers, where a nominee account has been opened for the CSD;
• transfer of the majority of clients' transactions of depositories from registrars to the CSD (massive transfers of assets from registrars to the CSD were effected in March 2013 . Now records of CSD prevail over registrar’s);
• change in procedure of transaction settlement in registers, where one of the correspondent accounts belongs to the CSD.

It is important to note, that only NCBO (no change of beneficial ownership) transfers are allowed between CSD’s nominee account and owner account in registrars (with some exceptions related to certain types of corporate actions).
The charge for NCBO (No Change of Beneficial Owner) transactions is pre-determined by the FMS and is fixed at:

• RUB 2,000 if the price of securities is less than RUB 1, 000, 000;
• RUB 10, 000, if the price of securities is more than RUB 1,000, 000.

For providing confirmation on transfer of ownership title an additional fee is charged by registrars. The seller or the delivering party usually has the responsibility for paying re-registration fees for equity transactions. While the registrar does not have the right to ask for a copy of the original custody agreement and/or the Purchase and Sale Agreement (PSA), the details of the Transfer Order shall refer to both documents.

According to the Russian Legislation, the local custodians are obliged to disclose the beneficiary owners of stocks upon the request from registrars.

Fixed Income: Fixed income instruments available on the Russian market is not required.

Physical: Physical share certificates are non-existent.

There are currently 32 registrars where equities are held for various issuers. After 1 October 2014 all Joint stock companies maintaining registers of shareholders themselves must delegate this function to an independent party holding a proper license (previously this rule was obligatory only for the issuers with more than 50 shareholders). One issuer can have only one registrar but one registrar can manage the register for multiple issuers. The registrar has to be licensed by CBR).

The registrar receives documents, checks them, and if everything is in compliance with the registrars’ requirements accepts the documents. According to the Reg. No 27, the registrars must update their records and issue a notification within three days from the date of acceptance of the documents.

Shareholdings in this market may be required to be disclosed by the beneficial owner, particularly when such shareholdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the timeframe required. If you have any questions regarding this issue we encourage you to consult your legal counsel.

Failure to comply with the reporting requirements in this market may lead to penalties and / or other sanctions.

Under Russian law, a person acquiring, directly or indirectly, voting rights in relation to 5% or more thereof shares is required to notify a joint stock company and the federal body responsible for securities market of, and a joint stock company must then publicly disclose, such acquisition, as well as any subsequent acquisitions or disposals resulting in the crossing of 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% or 95% thresholds by such person. The notification shall be made within 10 days from the moment when the acquirer became aware or should have become aware of the relevant acquisition. A holder of more than 5% of shares is required to file with a joint stock company and the federal body responsible for securities market information about its controlling shareholder (if any) or notify a joint stock company and the federal body responsible for securities market about the absence of any such controlling shareholders.

The owner of the ordinary shares must disclose such information by indicating their name, legal address, state registration number and tax ID, the information about the issuer, and of shares, and the number of shares belonging to them before and after the transaction. The data should be submitted to both the issuer of such shares and the Bank of Russia.

Under Russian law, persons acquiring, directly or indirectly, through one or several transactions, more than 1% of shares (interests) or become trustee in respect of more than 1% of shares (interests) of a credit organisation, must notify the Central Bank of such acquisition within 30 days from the date of acquisition.

Acquisition of more than 10%, 25%, 50% or 75% of shares (interests) or becoming trustee in respect of more than 10%, 25%, 50% or 75% requires prior approval of the Central Bank. In addition, acquisition by an individual or a legal entity of control, directly or indirectly, through one or several

Mandatory Buy-back Rule
An entity which together with its affiliates has in intention to purchase more than 30% of the company`s voting shares has the right to make a public offer to the shareholders of the company to purchase the voting shares. The offer is done via the company.

An entity which together with its affiliates owns more than 30%, 50%, 75% of voting shares of an open joint stock company is required to make, within 35 days of acquiring such shares, a mandatory tender offer to all remaining shareholders of the company to buy the rest of company's voting shares. 

An entity which together with its affiliates acquired more than 95% of the total number of voting shares of the company as a result of a voluntary offer is obliged to purchase remaining stake owned by other (minority) shareholders on their demand and may require such shareholders, within 6 six months from completion of a tender offer, to sell such shares.

Buy-ins are not yet the practice in Russia. Should a counterparty fail to deliver the securities on the agreed settlement date, liability measures that have been negotiated between the counterparties upon trade conclusion are applied. Such measures can include a penalty, compensation of losses (including expenses for purchase of the equal securities by the buyer under the original trade).

Securities lending is not regulated by law.

The National Securities Market Association (NSMA) has taken a leadership role in conjunction with major market participants, for the development of the legal documentation and regulatory infrastructure for Securities Lending in Russia. These developments are currently in progress.

None

Russian Federal Law #115-FZ “On Counteractions to the Legalisation of Illegal Earnings (Money Laundering) and the Financing of Terrorism” (of August 7, 2001) defines the following measures for AML control:

• Mandatory internal AML control procedures.
• Mandatory control and monitoring.
• Prohibition to inform clients and other parties on the AML measures undertaken.
• Other measures in accordance with federal legislation.

The Central Bank of Russia (CBR) issued additional regulations to Russian financial institutions committing local FIs to properly identify final beneficiaries for all clients and counterparties, monitor all transactions, and inform state authorities of certain types of transactions.

For clients serviced out of certain locations this is an FII market. Please refer to the Terms & Conditions for Global Custody or contact your RBC Investor Services' Client Manager before making portfolio investments.

In order for foreign investors to invest in strategic industries in Russia, they will need to provide a business plan detailing their plans to the Federal Anti Monopoly Service. After the FAS analyses all information concerning the deal, it will send a request to the FSB. A final decision will be taken by the Prime Minister. It is expected that this requirement will make it more difficult to invest in strategic industries in Russia.

Foreign private investors have to obtain the approval of the Russian government before owning more than a 50% stake in a strategic company, while foreign governments and international organisations or companies controlled by them have to obtain government approval before obtaining more than a 25% stake in a strategic company. 

Preliminary approval from the Government Commission for Control over Foreign Investments must be received before purchase of more than a 10% stake in a company developing a strategic natural resource (5% rate is applied for foreign governments). Foreign investors that already have more than 50% in a strategic company and seek to acquire more are exempt from the provisions of the law. The exception is companies developing strategic deposits. 

The law includes 42 industries that are considered to be strategic for the country's defence and security. Among them are the nuclear, cryptography, arms, airline security, space, aircraft, television and radio broadcasting industries. It also applies to monopolistic producers of metals used in the defence industry, exploration and development of strategic mineral resource deposits, fishing and seafood production, telecommunications companies that have a dominant position in the market, as well as large printing and publishing houses. Strategic mineral deposits include deposits of uranium, diamonds, pure quartz, some rare earth metals, nickel, cobalt, tantalum, niobium, beryllium, lithium and platinum-group metals. They also include deposits with recoverable oil reserves of at least 70 million tonnes, natural gas reserves of at least 50 billion cubic meters, gold reserves of at least 50 tonnes, copper reserves of at least 500,000 tonnes and offshore deposits. 

Russian authorities monitor foreign ownership levels and may request holders to disclose beneficial ownership.

Prior approval of the FAS (the Federal Antimonopoly Service of Russia) is required whenever an individual, a company or a group of companies (foreign or resident) acquire in course of one of several transactions:

• More than 25, 50, 75 per cent of the voting equity of a Russian joint stock company with significant share in a particular market (‘Russian target’). This rule applies in case the joint assets of the Russian target and the companies of its group exceeds RUB 250 million (~ $7,1 mio) and one of the following criteria is met:
• The aggregate value of assets of the acquiring company and the target group exceeds RUB 7 billion (~$ 200 mio);
• The aggregate value of the revenue of the above entities in the last calendar year exceeds RUB 10 billion (~ $ 285 mio).
• Right to “determine the entrepreneurial activity” of the Russian target, or to function as the management body towards the Russian target.

The investor must complete the business plan under special templates of FAS and submit it before entering into a transaction. 
The violation of the above rules may result in recognition of the securities acquisition as null and void.

Under Russian law, persons acquiring, directly or indirectly, through one or several transactions, more than 1% of shares (interests) or become trustee in respect of more than 1% of shares (interests) of a credit organisation, must notify the Central Bank of such acquisition within 30 days from the date of acquisition.

Acquisition of more than 10%, 25%, 50% or 75% of shares (interests) or becoming trustee in respect of more than 10%, 25%, 50% or 75% requires prior approval of the Central Bank. In addition, acquisition by an individual or a legal entity of control, directly or indirectly, through one or several transactions, over shareholders or participants of a credit organisation, which own more than 10% of shares (interests) in such credit organisation, also requires prior approval of the Central Bank. In some cases, e.g. if shares are acquired through a public offering, the approval may be obtained after the acquisition. The Central Bank notifies the acquirer of its decision within 30 days from the date of receipt of filing. The Central Bank may not grant approval if it finds acquirer’s financial condition to be insufficient.

There are a number of specific requirements/restrictions for investments into Russian insurance companies.

• Insurance organisations being affiliates of foreign investors or having a foreign investor's stake that makes up over 49% of their authorised capital, cannot pursue certain kinds of insurance including private insurance, compulsory insurance, compulsory state insurance, property insurance, etc ( this restriction doesn’t apply to EU member state companies);
• Permission from the Department of Insurance Supervision of the Ministry of Finance should be obtained prior to sell of insurance companies’ shares to non-resident investors. This restriction is not applied for foreign investors selling shares of an insurance company;
• Only 25% of total authorised capital of all insurance companies in the Russian market can be owned by foreign investors.

In general, it is important to note that issuers maintain the right to put a limit on the percentage of their equity capital that can be held by foreign investors. If investment restrictions on individual ownership do exist, these will be contained within the charter of each company and can be set at any level determined by the company’s board of directors. The violation of the above rules may result in failures of securities transactions also fines are applicable.

• Regulation document: Federal Law “On Insurance Activity” #4015-1 with amendments and federal law #172-FZ.

Currently Russian law does not contain specific restrictions on the ability of foreign customers to convert roubles into foreign currency. The investor is free to convert any roubles held with a custodian into foreign currency.

Current RUB accounts of non-resident investors are used for execution of FXs, No specific restrictions for FX transactions exist.

The CBR coordinates and regulates cash circulation and settlement and monitors the activities of and sets the operational guidelines for private payment systems. The majority of inter-bank payments in RUB are cleared via the CBR Payment System in electronic form, and in five clearing batches / sessions a day – note however that all payments processed in the fifth batch will be booked with next value date. All RUB payments orders are executed in Cyrillic with local market specific details included as tax code (INN) and bank identification codes (BIK).

The Bank of Russia introduced amendments to the Provision "On CBR Payment System" making obligatory processing of transactions that exceed RUB 100 million via RTGS (Banking Electronic Speedy Payment System), moreover CBR’s payment system operations begin three hours earlier starting at 4:00 am Moscow time.

The Central Bank of Russia (CBR) has announced the implementation of a centralised RUB payment system, known as Perspective Payment System (PPS). The new system is built on a single centralised IT platform following ISO 20022 standards and will replace the existing payment framework formed by RTGS system and Batch system.

The main features of PPS are the following:

Payment Services:

• Urgent payment service is expected to operate similar to RTGS meaning that RUB payments for an amount over RUB 100 million will be processed by PPS in real-time, as mandatory by law requirements;
• Non-urgent payment service is expected to operate in clearing batches running each 30 minutes.

Netting of Payments:

• PPS will perform multilateral netting of payments. Urgent and Non-urgent payment services will be netted separately and the consolidation between both will be performed several times a day.

The PPS will support the cash settlement of operations executed in the financial markets and sent through the Central Counterparty National Clearing Centre (NCC), National Settlement Depository (NSD) and the National Card Payment System (NSPK).

The timeframe for processing of payments through PPS will be from 1.00am to 9.00pm (Moscow time). 

As soon as implementation of the system is fully completed it will replace Batch Processing Cycles as well as RTGS.

Currency control codes (VO codes) are required on payment instructions of non-residents to identify the type of transfer undertaken. They are used in accordance with regulations of the CBR, introduced under the liberalisation of currency in 2004.
Back-valuations are not possible due to daily CBR reporting requirements.

Overdrafts are not permitted in the market unless there is a signed Overdraft (loan) agreement in place between a Russian bank and its client.

There is no concept of Ex-Date and Pay Date in the market. All dividends are paid in roubles.

Dividends are announced at Annual General Meetings (AGMs). Some companies also announce intermediate (interim) dividends, which are announced at the Extraordinary General Meeting (EGM).

• Dividends are paid from the company's net profit. Dividends on preferred shares may be paid out of the company’s funds specifically intended for such purposes. All dividend income is usually paid in RUB, theoretically payments can be also made in other assets, thought it’s not the market practice);
• Dividends are transferred to the bank accounts of shareholders (those holding shares directly at the registrar) or to the custodians;
• There are no ‘cum’ or ‘ex’ dividend procedures set in the legislation in Russia;
• The time for payment of dividends to a nominee holder and an asset manager registered in the books of the shareholders register must not exceed 10 business days since the Record Date, and with regard to all other shareholders registered in the books of the shareholders register – no longer than within 25 business days after the Record Date;
• In case a nominee holder fails to pay out dividends to the entitled shareholder due to lack of valid bank details, the funds must be returned to the issuer within 10 days following expiration of a month after the dividends were transferred to such nominee holder .

A separate dividend record date is defined as follows: the list of persons entitled to receive dividends cannot be set earlier than 10 days and later than 20 days after the General Meeting where the decision on the dividends payment is approved.

The payment of interest on government instruments varies by issue and trading terms. 

It is standard practice to disclose the coupon / interest rate to the market participants. 

Government bonds (OFZ)

• Coupon and redemption payments are paid in RUB on a date fixed at the time of the issuance;
• The coupon is calculated on actual over 365 basis and paid on a semi-annual basis;
• Moscow Exchange doesn’t suspend trading in government bonds.

Corporate/Municipal bonds

• Coupon and redemption payments are paid in RUB on a date fixed at the time of the issuance;
• The coupon can be paid on a quarterly/semi-annual/annual basis;

Moscow Exchange suspends trading until coupon or redemption payment is completed.

Actual over 365 basis.

*This is not an instrument, but the right of the shareholder to acquire newly issued shares before they are offered for open subscription without any discount on the price for the initial public offer.

Early redemptions of Russian corporate bonds 
In order to participate in an early bond redemption of a Russian issuer, a foreign investor must have a Brokerage agreement with a local Russian broker who will execute the corresponding trade in the Russian stock exchange (for the majority of Russian bonds -MOEX).   

To complete the early bond redemption, in addition to a regular corporate action instruction for redemption, the investor must make sure that the bonds are transferred to a trading custody account with NSD, and submit a corresponding trade application to their broker to sell the bonds to the issuer's agent on Moscow Exchange on a redemption date. A separate payment instruction is required to transfer the redemption proceeds to a current RUB cash account from a brokerage account. 

Other
Pursuant to the amendments introduced by the Law 210-FZ which came into force on 1 July 2016, an issuer will be obliged to provide information related to the execution of rights under securities to the Central Securities Depositary (i) if the Central Securities Depositary nominee depo account is opened with such issuer’s register, or (ii) if the Central Securities Depositary performs mandatory centralised safekeeping of its securities. Other issuers may also provide information to the Central Securities Depositary on a contractual basis. The list of such information, the procedure and terms for its provision shall be established by the Central Bank’s regulation. Any information shall be provided in the electronic form and shall be stored by the Central Securities Depositary for at least five years. Once the information is provided, Central Securities Depositary will provide access to it on its official website to the depositors of Central Securities Depositary and other parties (on the basis of an agreement). Information disclosed on Central Securities Depositary’s website prevails over any other information relating to execution of rights to securities that might be disclosed in other sources. Central Securities Depositary is liable for any distortion of information received from the issuer.

It should be noted that pay dates on corporate actions vary and entitlement positions are based upon settled positions as at record date. It should also be noted that repurchase/tender offers are treated differently in the Russian market. If the offered price for a share is indicated in USD, the issuer arranging the repurchase offer converts the repurchase/tender proceeds as per the Central Bank exchange rate on the date of payment. As per the client’s relevant instruction custodians may then convert the received funds due to the shareholders back into USD using the interbank exchange rate, therefore a different rate than that of the Central Bank. Due to the difference between the exchange rates the amount in USD the shareholder receives may not be equal to the amount of shares sold multiplied by the offer price in USD.

Please note that certain voluntary corporate actions relating to local shares which are not processed electronically through the CSD under the “cascade” principle (.e.g. third party (market) tender offers) are very complicated with the requirements being very specific and dependent upon the issuer, therefore each event can be set under different conditions.

Shareholders recorded on the books of the registrar as at record date are entitled to benefit from the proposed dividend or corporate action. Change of ownership does not occur on trade date and is only recognised once the shares have been transferred from the account of the seller to the account of the buyer at the registrar, or from the seller’s account to the buyer’s account if the trade is settled on the books of the CSD or as a book entry transfer on the books of a custodian.

There is no default position with respect to the transfer of corporate actions entitlement for pending trades in the Russian market. The PSA or Master agreement signed between two counterparties should prescribe conditions of transfer of entitlement, protect the buyer and allow themselves on claiming such entitlement. 

Market practice is that a local custodian may initiate income claim only based on the definite instruction of a client.

Foreign nominee holder depo account may be opened by a Russian custodian to an entity which is incorporated in the following countries: (i) OECD members, (ii) FATF members or observers, (iii) MONEYVAL members, (iv) Common Economic Space members; or (v) countries regulator of which has an international treaty with the federal body responsible for the securities market in Russia; and which acts for the benefit of third parties, if such entity is empowered in accordance with its personal law to record and transfer rights to securities.

Foreign investors benefit from the same scope of rights attached to securities as Russian residents.

No

Provided in Russian:

• 20 days prior to the meeting;
• 30 days prior to the meeting in case the agenda includes the issuer’s reorganisation;
• 70 days prior to the meeting in case of Extraordinary General Shareholders’ Meeting related to election of members of the board.

Starting from January 1, 2014 the notice of the General Meeting of Shareholders may be placed on the web site of the company, on condition that this site is envisaged in the issuer’s Charter; the notice of the general meeting of shareholders will be sent in electronic form to nominee holders.

On request, subject to availability.

On request, subject to availability.

N/A

Splitting and partial voting is generally restricted and limited to a few cases.

15% withholding tax 
Tax agent – Local Custodian for both owner and Foreign Nominee Holder (FNH) /Foreign Authorized Holder (FAH) accounts

None (exception are companies with more than 50% of their assets in real estate that are not recognised as traded on the organised securities market
= 20% withholding tax). Tax agent – Local counterparty.

Algeria
Argentina
Armenia
Azerbaijan
Belarus
Botswana
Brazil
Bulgaria
Canada
Chile
China
Croatia
Cuba
Ecuador
Egypt
Hong Kong
India
Indonesia
Iran
Israel
Kazakhstan
Korea (North)
Kuwait
Kyrgyzstan
Latvia
Lebanon
Malaysia
Mali
Malta
Mexico
Moldova
Mongolia
Morocco
Namibia
Netherlands
Philippines
Qatar
Saudi Arabia
South Africa
Sri Lanka
Syria (Arab Republic)
Tajikistan
Thailand
Turkey
Turkmenistan
Ukraine
United Arab Emirates
Uzbekistan
Venezuela
Vietnam

Withholding Tax Rates in effect on 2023

None

VAT at 20% although banking and custody services are out of the scope of VAT.

Russia Holiday Calendar

• Central Bank of the Russian Federation cbr.ru
• National Settlement Depository nsd.ru
• Moscow Exchange www.moex.ru