corporate actions for executive brokerage clients

Corporate Actions for Executive Brokerage Clients

BCS FINANCIAL GROUP

Corporate actions services provided by BCS to Clients

are regulated by:

o CLIENT ASSETS RULES (SCHEDULE A to GENERAL TERMS OF

BUSINESS):

- If Client’s Assets are held by BCS

o SPECIAL TERMS FOR TRANSACTIONS ON RUSSIAN SECURITIES

MARKET (SCHEDULE G to GENERAL TERMS OF BUSINESS):

- If Client’s Assets are not held by BCS - Executive Brokerage

Clients

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Corporate actions available for Russian equities

traded on MICEX are the following:

o Voluntary Corporate Actions:

Buy-back, squeeze out

Pre-emptive right, open subscription offer

Voluntary exchange offer

EGM/AGM participation

o Mandatory Corporate Actions

Dividends

Conversion, spin off, split, reverse split, consolidation

Liquidation, termination

o Income claims

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The following corporate actions are not available

for Russian equities traded on MICEX:

Distribution of subscription rights

Stock dividends

Dividend reinvestment plans (SCRIP / DRIP)

Dividend currency options

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All corporate actions are to be processed by client’s custodian according to

the agreement between custodian and Client.

If Client doesn’t hold his assets in custodian of BCS, corporate actions for

such client are to be processed by the custodian where Client holds his

assets.

In this case only corporate actions claims (for trades open at RD or

Instruction Deadline) are to be processed for the client by BCS.

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Main specifics of Russian Corporate actions are:

o For corporate actions with RD rights or obligations associated with this

CA could not be tradable or transferrable but belong to a person

disclosed in registrar of company at RD.

o For corporate actions without RD rights or obligations associated with

this CA are tradable or transferrable together with the equity only.

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o Record date for any corporate action could be announced back dated or at the

same date with RD except RD for dividends at securities which are traded at LSE

as GDRs.

According to the “Admission and Disclosure Standards (6 june 2011)

point 3.10” «Dividends for Depository receipts on the International Order

Book (IOB) should be notified to the Stock Situations Team by no later than

9.00am three business days prior to the record date» if this was not done

«the depository bank will be required to set a separate record date for the

depositary receipt in line with the above (9.00am three business days prior to

the record date)»

o Nevertheless most Russian issuers (first of all blue chips) announce RD for

dividends beforehand; some issuers try to have the same RD for annual dividends

every year.

o Back dated RDs are more typical for GMs on which BOD members are to be

elected in cases of conflicts between major shareholders of companies.


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o Only company registered in Russia could be recognized as nominal

holder according to the Russian legislation (this requirement is valid till

1st January of 2013).

o Currently if a company registered not in Russia is nominal holder and

holds securities in names of its clients such company is recognized as

beneficial owner in Russia.


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o There is no auto compensation of any corporate actions on MICEX.

In case of any trades not settled on RD seller (the person who was

disclosed in registrar of shareholders) receives all rights to

participate in corporate action (incl. mandatory and voluntary). If the

buyer is going to participate in such corporate action the buyer

should submit formal claim letter to the seller.

o This is one of the reasons for MICEX to use T+0 settlement, in T+0

settlement no corporate actions claims could appear.

o No EX DD exists on MICEX. Dividends are to be paid on the settled

position of the shareholders as at the RD.


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Settlement of claims for Corporate Actions:

o Corporate actions claims which are to be settled in accordance

with Russian Law.

FEDERAL LAW ON JOINT-STOCK COMPANIES NO. 208-FZ OF

DECEMBER 26, 1995 – 57.2.

Only for participation in General meetings, only in case trade

settled before General meeting

“ In the event of the transfer of stock after the date of drawing up the list of

persons having a right to attend the general meeting of shareholders and before

the date of conducting the general meeting of shareholders, the person included

in this list having the right to participate in the general meeting of shareholders

shall be obliged to issue to the acquirer a power of attorney for voting or to vote at

the general meeting in accordance with the instructions of the acquirer of the

stock. Said rule also shall apply to each subsequent instance of the transfer of a

stock.”

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o Corporate actions claims which are to be settled in accordance

with Rules of Stock Exchange.

The securities market of Moscow Exchange falls into three market sectors:

• Main Market is the most liquid regulated market where trades are executed with the

Central Counterparty with advance depositing of assets. In the Main Market sector

stocks, bonds, depositary receipts and fund shares are traded in various trading modes

including the Main trading mode (anonymous indirect trades), Negotiated trades mode,

repo trades modes, modes for placement and redemption of securities and a number of

special modes. Trades executed in the Main trading mode are settled on the trade day

(T+0).

• Standard is a regulated market for stocks and fund shares where trades are made

with the Central Counterparty and settled on T+4. In addition to the main trading

session there is an evening trading session from 7.00 pm to 11.50 pm held in the

Standard sector.

• Classica is a classic market where direct trades in stocks, bonds and fund shares are

executed without full advance depositing of assets with an option to settle in US

dollars.

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Main Market of Moscow Exchange

• Trades executed in the Main trading mode are settled on the trade day (T+0).

• No corporate actions claims (except for REPO trades) could appear * .

* Claims for repo trades will be described later

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Standard sector of Moscow Exchange - legal rationale

• Trades executed in the STANDARD sector are made with the Central

Counterparty and settled on T+4 basis.

• According to the APPENDIX No.18 to the Rules of Securities Trading of the

Closed Joint-Stock Company "MICEX Stock Exchange" Terms and conditions of

transactions with the Central Counterparty in the Market Sector «Standard»

“ Except in cases of the termination of the PSA, the Seller undertakes to transfer

to the Buyer any dividends, interest, income or other distribution of profits on the

Securities (hereinafter referred to as “Income”) within 10 (ten) banking days

following the day of the Seller receiving such Income, provided that the date on

which the list of persons who have the right to receive Income (hereinafter

referred to as “the List”) is compiled coincides with or falls later than the date of

the PSA being concluded. ”

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Standard sector of Moscow Exchange - Claims settlement Market practice

• Exchange provides its participant with notification (if Exchange is to pay

dividend) or claim letter (if Exchange is to receive dividend)

• Claims are settled with cash transfers to bank details stated in claim letters.

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Classica sector of Moscow Exchange - legal rationale

• Settlement terms are flexible according to the agreements between CPs.

• According to the “TRADING AGREEMENT of Not-for-Profit Partnership Russian

Trading System Stock Exchange”








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Classica sector of Moscow Exchange - Claims settlement Market practice

• CPs provide each other with formal claim letters.


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SBL Trades on Moscow Exchange - legal rationale

• According to the “Rules of Securities Trading of the Closed Joint-stock Company

"Micex Stock Exchange”

“ If decision of the Director General of the Exchange does not provide otherwise,

the buyer in the first leg of the REPO transaction shall be obliged to transfer to the

seller in the first leg of the REPO transaction any dividend, interest or other

distribution (hereinafter – Yield) on securities in which the REPO transaction was

concluded within thirty (30) calendar days following the date of payment/transfer

of Yield by the issuer, if the list of persons entitled to its receipt is determined after

the actual date of settlement of obligations on the transfer of securities in the first

leg of the REPO transactions and before the settlement of obligations on the

transfer of securities in the second leg of the REPO transaction inclusive. The

parties shall be entitled to conclude an additional agreement establishing a

different term and/or procedure for the transfer of Yield, transferred by the Issuer

in non-monetary form. ”

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SBL Trades on Moscow Exchange - Claims settlement Market practice



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o Corporate actions claims on OTC trades - legal rationale

Most OTC trades in Russia are settled in accordance with agreement

mentioned earlier:

“TRADING AGREEMENT of Not-for-Profit Partnership Russian Trading System

Stock Exchange”, in accordance with it








If CPs prefer to use any special PSAs for trades, income claims are to be

described in this PSAs.

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o Corporate actions claims on OTC trades - Claims settlement

Market practice



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o Any other Corporate Actions claims except voting and income

claims (buy-back, pre-emptive right, conversions etc.)

Are not regulated by any laws, rules of exchanges or agreements.

Could be described in specific PSAs

Could be described in additional agreements

Could be settled according to market practice and arrangements between

trades.

o Claims settlement Market practice:

CPs provide each other with formal claim letters.

Specific for any particular case.

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Settlement of claims in BCS - legal rationale

o SPECIAL TERMS FOR TRANSACTIONS ON RUSSIAN SECURITIES

MARKET (SCHEDULE G to GENERAL TERMS OF BUSINESS):

“ 6.1 Unless otherwise agreed between the Parties in writing, where the period

from and including the Trade Date to and excluding the Delivery Date of a

particular Transaction extends over a record date in respect of any Securities

subject to that Transaction and the income payment date is beyond such period,

the Seller shall on the date such income is paid by the Issuer transfer to or credit

to the account of the Buyer an amount equal to (and in the same currency as the

Purchase Price, unless the Seller is instructed otherwise) the amount of income

received from the Issuer/paying agent or any third party. ”

“ 6.2 Seller’s obligation to transfer the income to the Buyer arises after actual

receipt of such income. However, the Seller shall use reasonable efforts to

receive the income from the Issuer/paying agent, but shall not be obliged to

enforce payment of the income at its own expense. “

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Settlement of claims in BCS - processing

After issuer announces that all dividend payments to the shareholders are

settled Client or BCS provide each other with formal claim letters.

Claims are settled with cash transfers to bank details stated in claim letters.

Scheme of dividend claim origination and processing

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Annual Dividend Live Cycle for Russian equities

1. Till 30th of January if the latest term is not stated by the Articles of association of company

Shareholder(s) who have not less than 2 % of share capital of the company have

right to suggest questions to the agenda of AGM (including promotion of candidates to

BOD but excluding recommended amount of dividends per share)

2. Not later than 35 days before the AGM

RD and Agenda (including recommended DPS) for the AGM should be approved

by BOD. DPS is approved by BOD and recommended to AGM, AGM should approve or

not approve recommendations of BOD.

3. Not earlier than 1st of March but not later than 30th of June

AGM of Company should take place, AGM approves dividends

4. Not later than 60 days after dividends approved by AGM (AGM date)

Dividends are to paid to the shareholders.

5. According to rules of Exchange (10 or 30 business days) or any other terms put by

specific PSA or agreements between traders

Claims between CPs are to be settled

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1Q, Half Year and 3Q Dividend Live Cycle for Russian equities

1. Not later than 3 month after period for which dividends are to be paid (1Q, Half Year or 3Q)

Dividends are to be approved by EGM

2. Not later than 35 days before the EGM

RD and Agenda (including recommended DPS) for the EGM should be approved

by BOD. DPS is approved by BOD and recommended to EGM, EGM should approve or

not approve recommendations of BOD.

3. Not later than 60 days after dividends approved by AGM (AGM date)

Dividends are to paid to the shareholders.

4. According to rules of Exchange (10 or 30 business days) or any other terms put by specific

PSA or agreements between traders

Claims between CPs are to be settled

• AGM - annual general meeting, EGM - Extraordinary general meeting

• DPS - dividend per share

• BOD - Board of directors

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Dividend Taxation for Russian equities

Instrument / Market Shareholder - resident

of Russia

Shareholder - non

resident of Russia - no

Tax treaties

Shareholder - resident

of Cyprus - Tax treaty

Shareholder - resident

of UK - Tax treaty

Local shares 9% 15%

5 % (position cost

more than 100000

EUR), 10 % for all

other cases

10%

ADRs/GDRs on

Russian local shares 15% 15% 15% 15%

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THANK YOU

In case of any questions regarding Dividends

or any other Corporate actions

please address them to

Anton Kashkin

Head of Corporate Actions

Investment Bank

BCS Financial Group

phone: +7 (495) 785 53 36 (ext. 7891)

mob: +7 (916) 564 63 58

[email protected]

corporate actions for executive brokerage clients

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