Russia: Update to the handling of ADR GDR Programmes of Russian underlying equities
Clearstream Banking1informs clients holding positions in ADR and GDR programmes with Russian underlying equities that the processing of new instructions to convert voluntarily or to cancel holdings has been suspended until further notice.
Although the National Settlement Depository extended its fee waiver in relation to voluntary conversions and cancellations until 30 December 2023, the European Union amended Article 5aa of EU Regulation 269/2014 on 23 June 2023. With the amendment and by way of derogation, the EU has empowered member state competent authorities to authorise conversions of a depository receipt with Russian underlying security held with the National Settlement Depository.
The relevant text reads:
(b) the following paragraph is inserted: ‘5aa. By way of derogation from Article 2, competent authorities of a Member State may authorise the conversion by 25 December 2023 by nationals or residents of a Member State, or an entity established in the Union, of a depositary receipt with Russian underlying security held with the entity listed under entry number 1012 under the heading “Entities” in Annex I for the purpose of selling the underlying security, and the making available of funds linked to the conversion of the depositary receipt and to the sale of the underlying security directly or indirectly to that entity in Russia, under such conditions as the competent authorities deem appropriate and after having determined that: (a) the depositary receipt was issued before 3 June 2022; (b) the relevant request for authorisation is submitted by 25 September 2023; (c) the holder of the depositary receipt is able to demonstrate that such conversion is necessary for the sale of the underlying security; (d) the sale of the underlying security is compliant with prohibitions under Regulation No 833/2014, including Articles 5 and 5f; and (e) no funds will be made available to any other entity listed in Annex I.’
In the sense of Article 5aa of EU Regulation 269/2014 (as last amended on 23 June 2023), all Russian securities are ultimately held with the National Settlement Depositary as issuer CSD.
Clearstream Banking, having consulted its competent authority, interprets the amendment to mean that conversions which have not been authorised by the relevant competent authority(ies) are now prohibited.
Accordingly, Clearstream Banking informs customers that it is seeking guidance from its competent authorities on the practical steps that must be followed to obtain authorisation. Until the guidance is received, Clearstream Banking is unable to process instructions for the conversion or cancellation of positions in depository receipts with Russian underlying securities. Conversion or cancellation instructions provided to the depository agents on or before 23 June 2023 remain valid and will be processed by Clearstream Banking on a “best efforts” basis. Instructions received after 23 June 2023 will be rejected.
For further information, clients may contact Clearstream Banking Client Services or their Relationship Officer.
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.