The russian legislator – despite the crossfire of sanctions, brought on by the current Ukrainian crisis, which involved the United States, the European Union and Russia – has recently approved law n. FZ-218/2014, which came into effect this past August, providing for new access rules of foreign securities to the Russian financial market.
The law has brought some significant changes to the previous the regulatory framework which regulated the access to securities issued by foreign entities to the Russian market and introduced the possibility to sell such securities to the public.
In particular, law FZ-218/2014 now provides that foreign equity may be offered/sold on the Russian financial market, including through the intervention of brokers, provided that such financial instruments are listed in a special list approved by the Russian Central Bank (Центра-льный Банк Российской Федерации) and are precisely qualified as “securities” (art. 8 (16), (г), l. 218/2014).
In order for the foreign security to circulate it is also necessary that a number of obligations are met in terms of information concerning, mainly, the financial instrument and the foreign entity issuing the security.
Russian financial advisorsa and brokers can buy foreign securities on behalf of their clients, even when they are not qualified investors.
However, this is only possible if the broker operates within a company which complies with the standards set by the Central Bank of Russia for information procedures in favor of the buyers.
In particular, the broker – in compliance with the aforementioned standards set by the Central Bank – is required to notify his client, who is not a qualified investor, the risks (linked to the performance of the market) that one runs when purchasing foreign financial in-struments.
In the event that the buyer of foreign equity is, however, a qualified investor, then the brokerage firms do not have to necessarily comply with the disclosure standards laid down by the Central Bank.
Law FZ-218/2014 has also renewed Article. 51.2, of law FZ-39/1996, under which it is now possible to assign the status of qualified investor to those who, in essence, have a turnover or assets relating to the market of financial instruments to an extent of no less than the ones set by the Central Bank of Russia.
Moreover, from the regulatory provisions it is cliear that the qualified investors, as opposed to the unqualified ones, may also acquire foreign securities that are not registered in the mentioned list of the Central Bank.
The above mentioned legislation changes appear to be of special interest, not only because they now regulate in a more complete way the circulation of foreign securities in the Russian market, but also because they are symptomatic of the interest that the Russian Federation – despite the peculiar political and economic scenario arising from the Ukrainian crisis – is still showing towards foreign investors.
(Trieste Office – Andrea Piras – 0039(0)407600281)
