Russia: Forced transfers
Further to announcements A22130 and A22154, Clearstream Banking1understands that the Federal Law No. 319-FZ dated 14 July 2022 and the new Articles of Law 319-FZ (as amended and restated by Law 519-FZ in its Article 5.1. and Article 5.5.) issued by the Federation of Russia are being implemented.
As a consequence, the Federal Law No. 319-FZ allows, amongst other dispositions, the holders of Russian domestic securities to directly request the National Settlement Depository (NSD) to transfer securities onto an owner account opened in the name of the beneficiary.
Clearstream Banking informs clients of the impact on the usual course of business with the securities deposited under depository code 5R.
If a forced transfer is submitted by a holder of Russian domestic securities to the NSD, the Federal Law No. 319-FZ and the Procedure for interaction published by NSD do not foresee any Ex-ante interaction with the FNH account holders (such as Clearstream Banking) but only Ex-post reporting.
According to information made available to Clearstream Banking, it is highly likely that the reporting will lack material information therefore preventing a clean reconciliation in the books of Clearstream Banking.
In this respect, Clearstream Banking can fulfil neither its settlement nor its reconciliation obligations under the EU Central Securities Depository Regulation and the EU Finality Directive, as would be the case in normal circumstances.
Impact on clients
In light of the above, Clearstream Banking will continue to prevent internal, Bridge and domestic settlement of the securities deposited under depository code 5R.
Also, due to Clearstream Banking’s inability to reconcile the positions that have been transferred by the NSD, income proceeds will not be credited to client sundry accounts (type SMA3C) until all impacted accounts affected by a forced transfer under one security/ISIN have been identified.
In order to complete the reconciliation as soon as possible, all clients holding these securities are expected to contribute to it by disclosing if any of their proprietary holding or the ones of their underlying clients have been transferred under the forced transfer procedure described above and/or by consenting to share their identity and account number to the NSD. Please refer to the two distinct corporate actions events that have been set up for this purpose.
As stated above, the participation in these events contributes to the resolution of the reconciliation breaks but does not guarantee it. It is only if and when a given security break is solved that Clearstream Banking will be able to book the proceeds received at the NSD to the entitled client SMA3C account. Individually participating in these events will not trigger any booking of the proceeds on the SMA3C account of the client participating in the events.
In addition, in the event of a redemption in one of those securities, the security will not be marked down but blocked on the client account until the break is resolved. The maintenance of these positions on the client account after redemption date aims to show that there is an outstanding redemption payment in absolute terms, however, does not necessarily mean that the entitlement is correct (as it depends on the outcome of the reconciliation investigation).
Further information
For further information, clients 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 clients 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.