Disclosure Requirements - Russia

08.08.2016

Disclosure Category: 1

Domestic debt securities and equities

In the case of holding Russian securities, Clearstream Banking S.A. (“CBL”) may fall under a legal obligation, notably under the Federal Law on the Securities Market N° 39-FZ, as amended, and/or the Russian Civil Code and/or the Russian Tax Code, as amended, to disclose the identity and holdings of its customers.

Background and legal basis

There are several types of requested disclosure to be borne by different categories of persons inter alia under the following Russian legal basis:

  • The  Federal Law on the Securities Market N° 39-FZ, as amended;
  • The Russian Civil Code;
  • Article 11 of the Federal Law “on banks and banking activity #395-1”, as amended;
  • The Russian Tax Code, as amended, more particularly in its Articles 214.8 and 310.2; and
  • Federal Law No 135-FZ “On Protection of Competition” art. 28-29.

Depending on the legal basis, the disclosure of the identity and holdings should be made to the issuer and/or to the Central Bank of Russia ("the CBR”) and/or any other national or local, judicial, administrative authority or Tax Authorities as the case may be.

Consent

In order to comply with the legislation as aforementioned, customers entering into transactions in the Russian domestic market must consent and are hereby deemed to consent to the required amendments entered into force after legal disclosure. Such consent includes the appointment of the requestor (for example, the CBR, the issuer or its agent) as attorney-in-fact of such customers, under power of attorney to collect from CBL the required information to be disclosed.

Customers not willing to give this consent cannot hold such securities and/or financial instruments in their account with CBL.

General disclosure requirements

There are, under Russian law, a number of obligations to report to the Russian Authorities (including, among others, the CBR, Russian Tax Authorities, the Russian Federal Antimonopoly Service (“FAS”) and relevant Russian investigation bodies and courts). 

CBL may at any time be required by national and/or local administrative and/or judicial Russian authorities or entities to disclose information about CBL customers and/or the beneficial owners holding positions in Russian securities. By default, CBL will, in accordance with the above requirements, disclose information on CBL customers.

Details to be provided may vary and CBL will, where relevant, contact its customers to collect the requested information.

Customers who are either unable or not permitted to disclose beneficial owner information or any other requested information must not hold Russian securities in CBL. CBL shall not be liable for any penalty or loss faced as a result of non-disclosure by a customer and any loss or penalty will be automatically and immediately passed on to the non-compliant customer.

In accordance with the most recent Russian regulations, the obligations on disclosure of information about  owners of securities arise in the following cases that are applicable to foreign nominee holders (FNHs). An FNH is a foreign organisation that is authorised to register and transfer rights to securities under its domestic legislation (that is, foreign global custodians, international central securities depositories, custodians, banks and broker-dealers).

In this respect, CBL shall be considered as an FNH:

  • For ad-hoc requirements of authorised bodies (securities market regulator, courts, arbitration courts, investigation bodies). 

Tax disclosure requirements

For tax relief purposes:

A tax disclosure must be done by an FNH for their underlying customers on a voluntary basis. Tax disclosure is to be performed on the aggregated geographical basis with the indication of the following key details:

  1. The aggregate quantity of securities owned by investors coming from a particular jurisdiction;
  2. The tax rate to be applied to such securities;
  3. Reference to the particular clause of the double taxation agreement between Russia and the jurisdiction that serves as the ground for the beneficial tax rate;
  4. Type of investor (legal entity or individual).

In cases of non-disclosure with regard to holdings in domestic debt securities or (consequent to the migration of equities to the FNH account effective 7 July 2014), the 30% withholding tax rate will be applied at source. For non-disclosure on equities, the standard 15% withholding rate will be applied at source.

For ad-hoc tax disclosure:

In accordance with Article 214.8 and Article 310.2 of the Russian Tax Code, in the course of an office audit and/or field audit conducted in the premises the withholding tax agent (that is, the National Settlement Depository (NSD - the Russian CSD) to ensure the accuracy of tax calculation and payment by a Withholding Agent with respect to FNH accounts in accordance with Article 214.6 of the Russian Tax Code, the Russian Tax Authorities may request from NSD  the disclosure of final beneficial owner's identity and holdings, as well as various documentation certifying its eligibility for the tax rate applied at source.

When submitting the voluntary per-country of residence information at the moment of income payment, the CBL customer must ensure that the final beneficial owner holds documents (apostilled and valid at the income payment date) certifying his/her tax residency status as, pursuant to the Russian Tax Code, the tax residency status of a beneficiary of income must be specified in summary information on the basis of documents certifying such tax residency status. Customers are responsible to comply with the obligations of Articles 214.8 and 310.2 of the Russian Tax Code and provide the requested documentation.

Obligation to report threshold crossings

Ownership and/or acquisition are to be reported in any of the following circumstances:

  • Acquisition by a foreign person1 (a person or legal entity neither resident nor registered in Russia) of ordinary shares where foreign participation in the charter capital of the issuer is limited by Russian law:
    Russian law requires the disclosure of new ownership of substantial stakes of a Russian company’s shares to the CBR and to the issuer of the shares, that have been purchased, within 10 days from the transfer of the ownership rights to the owner’s name. Ownership must be disclosed upon the acquisition of 5% or more of all voting shares, as well as when holdings exceed or go below 10%, 15%, 20%, 25%, 30%, 50%, 75% and 95% of all voting shares.
    When such a change in ownership is the result of an additional share issue, the owner of shares must disclose the information no later than 10 days after he/she becomes aware of or should become aware of the state registration of the additional share placement report.
    The investor must complete the notification under special templates of the FMFS regulation #11-44 pz-n and submit this to the issuer of the shares and the CBR.
  • Ownership upon acquisition by a domestic or foreign person1 or legal entity of ordinary or preferred shares in a stock company that are more than 30% of all voting shares (Chapter XI.1 of Federal Law On Financial markets):
    Reporting requirements to the CBR apply both to domestic and to foreign investors.
  • Ownership upon acquisition by foreign investors (a person or legal entity neither resident nor registered in Russia) of shares in a Russian bank exceeding 1% of the issued (ordinary and preferred) shares:
    For an investor purchasing a stake in a Russian bank exceeding 1% (as well as any subsequent increase or decrease of the stake), the investor must send a notification to the CBR within 30 days of the purchase.
  • Acquisition of shares in a Russian bank in excess of 10% of the issued shares requires prior approval from the CBR.

Note: As bonds and equities held with CBL are safekept in the Foreign Nominees Account, an FNH (thus, CBL) is not subject to the obligations that the owner of the securities must perform in terms of threshold reporting once the stake reaches a certain threshold, or in terms of obtaining regulatory approvals for securities acquisitions where necessary.

Sanctions

Shareholders that do not comply with the reporting requirements may incur civil, administrative and/or criminal liability.

Depository Receipts (DRs) with Russian underlying equities

Background and legal basis

The basis for disclosure derives from the Federal Law N°415-Z "On Amendments to Certain Legislative Acts of the Russian Federation" in conjunction with the Law "On the Central Depository" (the 415-Z Amendment), which has impacts on DR programmes with Russian underlying equities.

Depending on the legal basis, the disclosure of the identity and holdings should be made to the issuer and/or to the CBR and/or any other national or local, judicial, administrative authority or Tax Authorities as the case may be.

Consent

In order to comply with the aforementioned legislation, customers entering into transactions in the Russian domestic market must consent and are hereby deemed to consent to the required amendments entered into force after legal disclosure. Such consent includes the appointment of the requestor (for example, the FMS of the CBR, the issuer or its agent) as attorney-in-fact of such customers, under power of attorney to collect the required information from CBL to be disclosed.

Disclosure obligation

1. DR holders disclosure on an ad-hoc basis to the issuers

The 415-FZ Amendment dated December 2011 and Federal Law 282 FZ dated December 2012 require the identity of the Ultimate Beneficial Owners (UBOs) of the DRs to be disclosed to the issuers on an ad-hoc basis with effective date July 2012.

2. DR holders disclosure on a mandatory basis

Following the CBR Directive N° 3995-U dated 13 April 2016 amending the CBR Regulation N°3680-U dated 15 June 2015 “on requirements to procedure and form of submission by foreign organizations acting in the interests of other persons of information about securities owners and other persons exercising rights over securities, as well as on the number of securities held by such persons”, DR programs fall under a legal obligation under the Federal Law on the Securities Market N° 39-FZ since 9 May 2016 where certain information about the legal name and the legal address, or the Legal Entity Identifier and/or any other information (details to be provided may vary and CBL will, where relevant, contact its customers to collect the requested information) are requested to:

  • Russian and non-Russian legal entities;
  • Not Legal entities; and
  • Individuals.

Sanctions

Holders that do not comply with the reporting requirements may incur suspension of rights and entitlements on their securities and/or administrative measures.

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1. "Person" means private entity or legal entity or corporation (be it a group of private entities or of legal entities or corporations).
2. These requirements are subject to the opening of specific "DR Programme Depository Accounts" with the National Settlement Depository (NSD) by the issuers of the relevant DRs with effective deadline of 6 November 2013.