INVESTOR PROTECTION CLUB

On 12 October 2022, at an extraordinary meeting, members of the Investor Protection Club discussed the procedure for obtaining licences to unblock the assets of Russian investors.

The National Settlement Depository (NSD) notified members that it had sent requests to the Belgian and Luxembourg finance ministries to apply for master licences to unblock the securities of all unlisted investors at Euroclear and Clearstream.

Club members agreed that if European financial regulators did not respond by the end of October, they would prepare requests for individual licences to unblock the securities of non-sanctioned investors in accordance with the European Commission’s background note of 6 October 2022.

The Investor Protection Club currently includes Moscow Exchange Group, NAUFOR, the NFA, the Association of Russian Banks and more than 100 companies with direct contractual relations with the NSD.

The purpose of the Club is to create a common information space for market participants, as well as to protect investors’ interests in the context of the economic restrictions imposed on the NSD by the European Union.

"Moscow Exchange is setting up an investor protection club with market participants and intends to defend their interests in a European jurisdiction", the trading venue said. The Bank of Russia received around 24,000 "complaints" from individuals in February-May 2022, including complaints from retail investors about brokers dissatisfied with their inability to sell their "frozen" assets.
The regulator estimates that Russian investors now have about RUB 6 trillion worth of securities "frozen".
The regulator said Thursday evening that it held a meeting with experts on retail investor protection to discuss the problem of foreign asset freezes.
Bank of Russia officials stressed at the meeting that there was no quick way to unblock.
"A number of measures are already being implemented to address the problem of blocked international securities of Russian origin: these are securities of Russian companies that were issued under international law and traded on overseas exchanges," the Central Bank said.
It was decided to pay directly proceeds on securities and convert depositary receipts into Russian shares, bypassing the foreign infrastructure, and an option to convert Eurobonds into Russian bonds has appeared.
"The Bank of Russia welcomes initiatives to appeal to the judiciary to unblock assets. Further efforts to unblock international securities will be determined by the prospects of negotiations with international regulators and judicial authorities," the regulator said.
"In total, international assets worth about RUB 6 trillion have fallen under the blockade. Investors cannot sell these securities on the exchange and get income. Nonetheless, such assets can be sold on the OTC market within the Russian depository system. But demand for them is low and the price is lower than for the same securities that are not blocked", the Central Bank commented.
In the first half of 2022, the Bank of Russia recorded a sharp increase in retail investor complaints against securities market participants, primarily brokers (there were 4,775 complaints against them in April compared to 174 in February). More than half of the complaints related to the transfer of assets from a sanctioned broker to another professional participant, while 19% of the complaints related to the blocking of assets and receipt of proceeds on international securities.