Russia: Conversion process for depository receipts with Russian underlying securities held in the German market
Clearstream Banking1 informs clients that depository receipts (DRs) with Russian underlying shares currently held through Clearstream Banking S.A. (CBL) on Clearstream Banking AG’s (CBF) direct CSD link with DTCC (depository code 4G) can be converted upon completion of their realignment and depending on the books opening status.
In cooperation with its custodian in the U.S. market, Citibank N.A., Clearstream Banking has developed a one-off realignment process that will enable CBF clients to instruct the conversion of their DRs.
Impact on clients
In order to allow clients to exercise their conversion rights of DRs with Russian underlying shares which they hold in the German market (via remote code), their position must be realigned from CBF’s account in DTCC to Citibank’s account in DTCC. As such, a one-off realignment has been approved by Citibank N.A., acting as Clearstream Banking’s custodian in the U.S. market, on an exceptional basis and under certain conditions.
This process also includes the opening of an additional segregated “CBL/CBFi account” for the client which will be used solely for the purpose of the Russian DR programme conversion. No security other than Russian DRs will be held on this account and no transfer will be allowed for any positions held there irrespective of the settlement status of the security.
Clearstream Banking will open the additional “CBL/CBFi account” for each client and realign the position from DTCC to Citibank N.A., thereby debiting the client’s “original CBL/CBFi account” and crediting the newly opened “CBL/CBFi account”.
Upon receipt of the securities on these newly opened accounts, Clearstream Banking will send a CONV Conversion Notification (MT564) to clients describing the process for them to instruct the conversion of the realigned DR positions.
Clients wishing to convert their DRs will be required to send their conversion instruction from their newly dedicated opened CBL/CBFi account under the separate event pursuant to Article 6b (5aa) of Regulation (EU) 269/2014 and in line with the event requirements but only upon successful prior realignment.
Only positions where the books are open for conversion will be eligible for the realignment. Currently, the programmes opened for conversion by the DR agents are the following:
Common Code | ISIN | Security Name | DR agent |
131156707 | US69343P1057 | ADR PJSC LUKOIL REG | Citibank N.A. |
019332543 | US7785291078 | ADR PJSC ROSTELECOM REG | Citibank N.A. |
022468022 | US6074091090 | ADR MOBILE TEL PJSC REG (1ADR/2SHS) | JPMorgan Chase Bank, N.A. |
Clients are reminded that books for conversion can be closed at any moment which will prevent any conversion of their DRs to underlying Russian shares. Clearstream Banking reserves the right, without any prior notice or other formalities at any point in time, to terminate or suspend the provision of conversion service and realign the position back to the original CBF account.
The process described above does not force clients to convert their positions. Unconverted positions will be realigned back to the original CBL/CBFi account upon the expiration of the conversion window of an individual DR programme.
This realignment represents a unique opportunity for clients to instruct for a conversion of their DRs.
Newly opened accounts will have identical reporting as an already existing CBL/CBFi account. No account maintenance fees, custody fees, nor transaction fees other than specific DR conversion fees will be charged on these specific newly opened CBL/CBFi accounts.
Positions reported by the DR agent or by the customer as converted under automatic and forced conversion procedures but currently blocked on the client account will be excluded from the realignment.
As a reminder, automatic and forced conversion procedures resulted in Russian shares being debited from the custody account of the DR agent in Russia with neither the consent nor involvement of DR agents and Clearstream Banking. Clearstream Banking has no visibility on these processes and is exclusively dependent on the information received externally and cannot verify which positions have been converted under Russian Federal Law No. 319-FZ. Customers are reminded of their obligation to report any positions converted under automatic and forced conversion procedure.
Clearstream Banking makes no recommendation and gives no investment, legal or tax advice regarding the above matters. Clearstream Banking shall not be liable, and clients electing to instruct conversion of their DRs bear sole responsibility, for any and all harmful consequences, losses or damages, which may be suffered by clients or DR holders in connection therewith.
Clearstream Banking shall bear no responsibility for any delay during the account opening and realignment process, nor in case any of these cannot be acted upon or executed, due to sanctions, monitoring activities or any circumstance beyond Clearstream Banking’s field of action.
Important
Clearstream Banking cannot however guarantee that the realignment process described above will indeed lead with certainty to the effective conversion of DRs with Russian underlying shares, which remains subject to specific conditions as detailed in the Conversion Notification (MT564).
Background
In the past, clients wanting to convert DRs could realign their position from Clearstream Banking AG (CBF) to Clearstream Banking S.A. (CBL) and instruct a conversion. From August 2022, the realignment of the positions in Russian DRs was not possible as described in Announcement D22051. Clients had the possibility to instruct a conversion on their own and deal directly with the DR agents until the settlement in Russian DRs was suspended due to uncertainties and circumstances beyond Clearstream Banking’s control with regard to automatic and forced conversion procedures set forth under the Russian Federal Law No. 319-FZ.
Further information
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany, and registered in Register B of the Amtsgericht Frankfurt am Main, Germany, under number HRB 7500.