Russia: Sundry account arrangements for cash corporate action proceeds affected by Russia-related sanctions and countermeasures - Update
Note: This announcement originally published on 17 May 2022, has been updated to provide customers with further information on new sundry account types. Changes have been highlighted.
Following Announcements A22053, A22055, A22059, Clearstream Banking1 has adapted its procedures for reflecting affected cash claims arising from corporate events that cannot be credited to customers under various EU, UK and U.S. sanctions imposed on Russia-related entities and under Russian countermeasures and capital controls.
Since 18 May 2022, Clearstream Banking has initiated the creation of new sundry account types and the renaming of existing sundry accounts as described below.
Type 1 - Securities issued by entities subject to sanctions
Where paying agents or domestic depositories retain custody proceeds to ensure compliance with sanctions regulations that affect the issuer of a security, Clearstream Banking is reflecting customer entitlements on a sundry memorandum account for the customer. The use of the memorandum account signifies that Clearstream Banking does not have access to and has not received the funds.
Sundry Memorandum Account – Type 1 – is reported as:
SMA1–[Customer Name/Customer Account Number]
Clearstream Banking does not have access to the cash entitlement as long as the sanctions regulations remain in place. Clearstream Banking will transfer the funds reflected in the sundry accounts to customers' accounts once Clearstream Banking itself has gained access to the funds blocked upstream Customers may not instruct Clearstream Banking in respect of such entitlements. The opening of the SMA1 will be reported to the customer via MT599. The balance of the entitlement shown on the SMA1 will be reported to customers via MT950.
Type 2 – Non sanctioned securities deposited outside Russia and paying in Russian Rubles
SMA2
For reasons independent from Clearstream, some RUB proceeds may be retained either by the issuer or the paying agent at its determination (for example, disruption at the paying agent’s CCB level disabling the paying agent to receive the funds from the issuer).
Sundry Memorandum Account – Type 2 – is reported as:
SMA2–[Customer Name/Customer Account Number]
Clearstream Banking does not have access to the cash entitlement as long as the sanctions regulations remain in place and the RUB proceeds are retained by the issuer or paying agent. Clearstream Banking will transfer the funds reflected in the sundry accounts to customer accounts once Clearstream Banking itself has gained access to the funds blocked upstream. Customers may not instruct Clearstream Banking in respect of such entitlements. The opening of the SMA2 will be reported to the customer via MT599. The balance of the entitlement shown on the SMA2 will be reported to customers via MT950.
SRA2
As announced in the Operational News, Clearstream Banking has experienced disruption in the processing of RUB payments at its RUB CCBs, first the National Securities Depository, then Rosbank, which led Clearstream Banking to instruct Common Depositories, Common Service Providers and Domestic Depositories not to pay RUB proceeds to those accounts. While Clearstream Banking was able to offer alternative arrangements to its customers willing to benefit from them, the remaining customer cash entitlements may have been held pending at the paying agent. Clearstream Banking is reflecting customer entitlements on a sundry receivables account for the customer. The use of the receivables account signifies that Clearstream Banking has a current receivable pending with the paying agent but is not able to collect the RUB funds which have therefore not been credited to its CCB network. Consequently, the sundry receivables account serves as a record of Clearstream Banking’s current payables amount in RUB to the customer. Any RUB amount due to a customer in this scenario is recorded on the customer's Type 2 account.
Sundry Receivables Account – Type 2 – is reported as:
SRA2–[Customer Name/Customer Account Number]
Customers may issue foreign exchange instructions to Clearstream Banking in respect of amounts held on the sundry receivables account Type 2. The opening of the account will be reported to the customer via MT599. The balance of the entitlement shown on the account will be reported to customers via MT950.
This scenario is applicable only in the event that it is no longer possible for Clearstream Banking to collect RUB money transfers in the domestic market.
Type 3 / Type C - Securities deposited in Russia with the National Securities Depository
Cash proceeds of corporate actions on securities deposited with the National Securities Depository (NSD) in Russia (Depository Code 5R) since 5 March 2022 have not been credited to Clearstream Banking’s CCB account but to the type C account opened for Clearstream Banking by the NSD, which is sometimes also called a type S account. Clearstream Banking is reflecting customer entitlements on a sundry memorandum account for the customer. The use of the memorandum account signifies that Clearstream Banking has not received and does not have access to the funds.
Sundry Memorandum Account – Type 3C – is reported as:
SMA3C–[Customer Name/Customer Account Number]
Clearstream Banking does not have access to the cash entitlement as long as the proceeds remain blocked on a Type C account at the NSD. Clearstream Banking will transfer the funds reflected in the sundry accounts to customers' accounts once Clearstream Banking itself has gained access to the funds blocked upstream. Customers may not instruct Clearstream Banking in respect of such entitlements. If customers believe that it fulfils the conditions set out in Russian regulation to enable Clearstream Banking to instruct the NSD to debit its Type C account, they should contact their Relationship Manager or Customer Service. The opening of an SMA3C account will be reported to the customer via MT599. The balance of the entitlement shown on the SMA3C will be reported to customers via MT950.
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.