The issuer’s obligation to disclose data relating to the replacement of the keeper of the register of securities holders
Pepeliaev Group advises that 22 November 2016 saw the entry into force of the Bank of Russia's Instruction No. 4107-U dated 23 August 2016 ‘On the procedure for an issuer to disclose (provide) information in the event of the replacement of the keeper of the register of securities holders’*.
Please be reminded that, in accordance with article 2 of Federal Law, No. 39-FZ ‘On the securities market’ dated 22 April 1996, an issuer is a legal entity, a state executive body or a local government body which on its own behalf or on behalf of a public body bears obligations to securities holders in relation to the exercise of rights attached to such securities. Therefore, the scope of the application of the Bank of Russia’s above Instruction is rather broad and affects not only joint stock companies. The concept of securities is specified in article 142 of the Russian Civil Code.
Currently, the information is disclosed by rules established by Order No. 10-77/pz-n of Russia's Federal Financial Markets Service dated 23 December 2010 ‘On approving the Regulations concerning the interaction procedure when documents and information are transferred which constitute the system for maintaining the register of securities holders’.
PG comments: It would be logical to assume that the rules set out in Order No. 10-77/pz-n will not be applied. Such rules concern the obligation to post on the Internet notices if the entity is replaced which maintains the register of the securities holders. However, this conclusion does not follow from Instruction No. 4107-U of the Bank of Russia, if construed literally.
Please find below the main innovations based on Instruction No. 4107-U of the Bank of Russia:
- If the keeper of the register is replaced, the issuer must disclose the relevant information in the form of two different communications:
- that the keeper of the register has been replaced, with the disclosure deadline being not later than two business days from the date on which the relevant agreement to maintain the register is concluded;
- of the date when the new keeper of the register is to start maintaining the register, with the disclosure deadline not later than two business days from such date.
- The communications must be brought to the attention of all interested parties (including the holders of the issuer’s uncertified registered securities (‘holders of securities’) in the following ways:
- by being disclosed in the newsfeed of one of the accredited information agencies (this method is applicable to all issuers, and is mandatory if the number of holders of an issuer’s securities exceeds 50);
- by relevant communications being sent by registered mail or against signature to acknowledge receipt unless another method of sending (forwarding) provided for by the rules for maintaining the register is specified by the holders of securities (such method is applicable on a voluntary basis if the number of the holders of an issuer’s securities exceeds 50).
- The notice of the keeper of the register being replaced must contain information on the grounds for terminating the agreement to maintain the register and (if applicable) information regarding the issuer’s management body which passed a resolution for the agreement to be terminated. We note that Order No. 10-77/pz-n does not provide for such detailed instructions.
What to think about, what to do and what to note:
We draw to your attention that if the specified procedure is violated, an administrative fine may be imposed:
- officers face a fine of RUB 30,000 to RUB 50,000 or may be disqualified for a period from a year up to two years;
- legal entities face a fine of RUB 700,000 to RUB 1,000,000.
Before the regulator provides its official clarifications, the information should be disclosed both in accordance with Order No. 10-77/pz-n and with the Bank of Russia's Instruction No. 4107-U, or clarifications should be requested directly from the regulator.
The disclosure deadlines need to be monitored and calculated correctly. Standard forms of notices must also be drafted.
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* Registered with the Ministry of Justice of the Russian Federation under No. 44255 on 7 November 2016. Posted on the Bank of Russia’s official web site on 11 November 2016.