Russia: Updated EU Regulation 269/2014 related to the handling of ADR and GDR Programmes with Russian underlying securities
Clearstream Banking1 informs clients that pursuant to Article 6b(5aa) of Regulation (EU) 269/2014, the competent authorities of a Member State may authorise the conversion of a depository receipt with Russian underlying security held with the National Settlement Depository. The relevant text reads:
‘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 101 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.’
Clients and ADR/GDR holders wishing to convert are reminded to reach out to the competent authorities in their Member States to apply for an authorisation under Article 6b(5aa) of Regulation (EU) 269/2014 by no later than 25 September 2023.
Please note that the fee waiver until 30 December 2023 declared by the National Settlement Depository in relation to voluntary conversions and cancellations does not allow for the conversions of a depository receipt with Russian underlying security without authorisation under Article 6b(5aa) of Regulation (EU) 269/2014.
Following guidance received from the German and Luxembourgish competent authorities, Clearstream Banking S.A. (CBL) will process conversions instructed by its clients for ADR/GDR holders being nationals or residents of a Member State if the following requirements are met and conversions are not inadmissible for other reasons.
For any ADR/GDR conversion instruction, in respect of the below securities, Clearstream Banking S.A. clients must, in the narrative field of their instruction (:70E: INST field in MT565 or Corporate Action Instructions Narrative in Xact Web Portal), represent that they have obtained authorisation under Article 6b(5aa) of Regulation (EU) 269/2014 and provide:
(a) the name of the competent authority of the Member State which has granted the authorisation,
(b) the reference number of the authorisation, and
(c) the date of the authorisation.
The wording required in client instruction : “EU Reg. 269/2014 art. 6b 5aa COMP. License nb: xxxxxx date: dd/mm/yyyy– Issuing NCA: xxxx.”
Instructions without the required representation of sanctions compliance will be rejected.
Notwithstanding the above requirements, clients are reminded that according to the Clearstream Banking S.A. General Terms and Conditions, clients are responsible for ensuring that all instructions settled by them through Clearstream Banking S.A. comply with applicable laws, including any applicable sanctions, including but not limited to those of the European Union, the United Nations, the United States and the United Kingdom.
Clearstream Banking AG (CBF)
Clients holding DRs on CBF’s direct settlement DTCC, New York, remained unable to process DR conversions for the reasons communicated in the announcement D22051.
Clearstream Banking is in the process of defining a procedure which could enable CBF clients to instruct a DR conversion via CBL. Upon client’s consent at account level, it is expected that positions will be realigned from CBF to CBL in such manner that CBF clients will be in a position convert their DRs as described above pursuant to Article 6b (5aa) of Regulation (EU) 269/2014 and in line with the conversion event requirements. Details of such possibility will be published in due course.
Impact on clients
Clearstream Banking will resume processing of DR conversion instructions on or around 20 September 2023, for those DR programmes where DR agents are supporting the conversion and have their books open for cancellation.
Clearstream will provide updated corporate action notifications to the holders of applicable DR programmes for which the conversion is possible.
CBF clients are expected to have the possibility to instruct a DR conversion and the details of the conversion option should be published in due course.
For further information, clients may contact Clearstream Banking Client Services or their Relationship Officer.
1. Clearstream Banking refers to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany, and registered in Register B of the Amtsgericht Frankfurt am Main, Germany, under number HRB 7500.