Russian counter-sanctions: new guidelines for transactions with foreign securities

In the course of regular updates on Russian counter-sanctions, we would like to provide you with information on Decree of the President of the Russian Federation dated November 08, 2023 No. 844 “On Additional Temporary Economic Measures Related to Circulation of Foreign Securities” (“Decree No. 844”).

Decree No. 844 entered into force on November 08, 2023 and provides for a special procedure for the transactions complying with the following criteria (“Transactions”):

• {{(A)}} Transaction entails a transfer of title to foreign securities from Russian residents to non-residents;

• {{(B)}} foreign securities are recorded on the accounts opened for the Russian national central depository as an entity acting in the interest of other persons/entities;

• {{(C)}} Transaction is to be performed at the expense of non-residents’ funds placed on C-Type accounts opened with the Russian banks;

• {{(D)}} the initial cumulative value of foreign securities to be transferred under one Transaction will be calculated by the Russian Government Commission and should not exceed RUB 100,000.00.

The Transactions should be made as an auction sale. The exact procedure for such auctions will be established by the Russian Governmental Commission.

Foreign securities bought by non-residents shall be credited to special transit securities accounts opened by Russian depositaries in the names of non-residential buyers. The securities will be set off from such transit accounts to foreign accounts/other transit accounts under special orders of non-residential buyers. The procedure of interactions between capital market participants and their clients as well as the regime of special transit securities account will be determined by the Bank of Russia.

Decree No. 844 also introduced amendments to Decree of the President of the Russian Federation dated March 01, 2022 No. 81 (“Decree No. 81”), in particular:

• {{(A)}} Transactions subject to Decree No. 844 are explicitly excluded from the scope of Decree No. 81;

• {{(B)}} transaction entailing transfer of title to foreign securities is also excluded from the scope of Decree No. 81 if following conditions are met simultaneously:
  
  

  • {{(i)}} foreign securities are held in a foreign organization authorized to carry out recording with regard to the securities, AND

  • {{(ii)}} settlements of such transactions are performed using bank accounts held by Russian residents in foreign banks disclosed to Russian tax authorities.

Decree No. 844 introduces experimental measures aimed at exchanging blocked securities of the Russian residents for essentially blocked funds of the foreign residents held in C-Type accounts. The success of its implementation will largely depend on the particularities of involved procedures which should be elaborated and established by the Bank of Russia as well as the interest of investors and market participants given small size of allowed Transactions. We will monitor new regulations to be adopted by the Bank of Russia and continue keeping you updated.