DEPOSITARY RECEIPT INDUSTRY BRIEFING ON RUSSIAN FEDERAL LAW NO. 415-FZ
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DEPOSITARY RECEIPT INDUSTRY BRIEFING ON RUSSIAN FEDERAL LAW NO. 415-FZ October 10, 2013 PRESENTED TO: SIFMA MONTHLY MEETING
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DEPOSITARY RECEIPT INDUSTRY BRIEFING ON RUSSIAN FEDERAL LAW NO. 415-FZ. PRESENTED TO: SIFMA Monthly meeting. October 10, 2013. Agenda. Depositary Receipts – Represented by BNY Mellon Overview of Russian Federal Law No. 415-FZ Impact of New Regulation - PowerPoint PPT Presentation
Transcript of DEPOSITARY RECEIPT INDUSTRY BRIEFING ON RUSSIAN FEDERAL LAW NO. 415-FZ
DEPOSITARY RECEIPT INDUSTRY BRIEFING ON RUSSIAN FEDERAL LAW NO. 415-FZ
October 10, 2013
PRESENTED TO: SIFMA MONTHLY MEETING
AGENDA
I. Depositary Receipts – Represented by BNY Mellona) Overview of Russian Federal Law No. 415-FZ
b) Impact of New Regulation
c) Response of Depositary Receipts Industry
II. Banks and Brokers – Represented by SIFMA Corporate Actions Section
III. Proxy Service Providers – Represented by Broadridge
IV. Next Steps – BNY Mellon Depositary Receipts
V. Questions
VI. Contacts
VII. Appendix
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I. Depositary Receipts
Michael O’BrienVice President, Senior Corporate Governance Analyst
BNY Mellon Depositary Receipts
OVERVIEW OF RUSSIAN FEDERAL LAW NO. 415-FZ
• Adopted by the Russian Federation on December 7, 2011, enacted on January 1, 2012.
• Law will require disclosure of beneficial owner information in order to receive dividends and for votes to be accepted. Law took effect on January 1, 2013, but the practical implementation of the law is delayed until likely the third quarter 2013 with the deadline of November 6.
• Dividend component of the law will cease on January 1, 2014. Thus, the period of compliance for this law will be relatively short.
• Voting aspect of the law will remain in effect indefinitely.
• Law requires the disclosure of the following information for votes to be accepted as valid:
Beneficial owner name
Address
Share/DR position
Country of Residence (for individuals) or Country of Incorporation (for companies)
• No exceptions made for Objecting Beneficial Owners (OBOs). OBOs will also need to disclose to validly cast their proxy.
• Information on Federal Law No. 415-FZ: http://www.adrbnymellon.com/files/PB36636.pdf
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IMPACT OF NEW REGULATION
• Vote participation
Potential reduction in voter turnout due to: Philosophical objections - beneficial owners may object to release of information, particularly
amongst OBO holders
Logistical considerations - “hiccups” involved in implementing new process may lead to diminished voting returns.
According to the BNY Mellon 2013 Russian Proxy Season Study, average DR vote participation was 38% of the outstanding. Some issuers may have quorum issues.
• Operational
Production and Delivery of Beneficial Owner List Required Format
Infrastructure Considerations
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RESPONSE OF THE DEPOSITARY RECEIPTS INDUSTRY
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RESPONSE OF THE DEPOSITARY RECEIPTS INDUSTRY
• Depositaries advised issuers to avoid paying dividend during end of year period when the disclosure requirement is applicable
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II. Banks/Brokers
SIFMA Corporate Actions Section of the Operations and Technology Society
Lawrence ConoverVice PresidentNational Financial Services LLC, a Fidelity Investment Company
Steven P. DapcicDirectorPershing LLC, a BNY Mellon Company
Veronica O’NeillVice PresidentBank of America Merrill Lynch
BROKERS PERSPECTIVE
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• Two (2) Disclosure Requirements mandated by the Russian Federation: Proxy voting - Beneficial owner disclosure will be required to the depositories
in order for your client to have their vote transmitted and accepted into the market at a proxy meeting. This information includes the beneficial owner name, address, and country of residence. This is effective for meetings with a record date of November 6, 2013 and forward.
Receipt of Dividend Payments – the law also requires the mandatory disclosure of beneficial owner information in order to receive any declared dividend payments. This requirement is also effective November 6, 2013, but amendments to the law will cease this requirement on January 1, 2014. The practical implication of this disclosure period is less than 2 months. The Depository banks have been working with the Russian Issuers to avoid any dividend payments during this period.
BROKERS PERSPECTIVE
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• Beneficial Owner Disclosure- Country of Residence Country of Residence- Service Providers will derive country of residence from the
mailing file received from each broker. For U.S. addresses, state and zip code will be interpreted to determine U.S.A. for country of residence and Foreign addresses include country of residence in the mailing file.
• Beneficial Owner Information Disclosed- Regulation permits disclosure of Advisor’s beneficial information but not 3rd Party Voting Agent Four (4) scenarios:
1. End Client – Mail to End Client – Disclose End Client
2. End Client – Advisor relationship – Mail to Advisor – Disclose Advisor
3. End Client – Advisor relationship – 3rd Party Voting Agent relationship – Mail to 3rd Party Voting Agent relationship – Disclose Advisor
4. End Client – 3rd Party Voting Agent relationship – Mail to 3rd Party Voting Agent relationship – Disclose End Client
Issue- Each Firm needs to analyze how data is provided to Service Providers to ensure the right level of disclosure. Firms may have different ways of interacting and consolidating/re-directing material with their Service provider; the data for the right level of disclosure might not be sent to the Service Provider.
BROKERS PERSPECTIVE
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• Communication Review if beneficial owner disclosure through VIF, prominent separate notice and proxy
advisory firms is sufficient. (See Appendix)
Firms should strongly consider separate internal communication of this regulation to their clients.
SIFMA Corporate Actions Board- Discussed in July and September Meetings.
SIFMA Corporate Actions Proxy Working Group- Monthly Meetings.
Email Notification sent on September 19th to SIFMA Corporate Actions Membership.
Today’s Webinar discussing the new Russian Federation Regulation.
III. Proxy Service Providers
Chip PasfieldV.P. Client Service, Broadridge Financial Solutions
PROXY DISTRIBUTION & TABULATION AGENTS
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•Job set-up and record date notice remain the same.
•Authorization to disclose shareholder name is requested.
•Voting is reported as it is today.
•File containing name, address, and number of shares is released at the end of the solicitation.
•The file will be separated, based on address, into domestic and foreign accounts.
IV. Next Steps
Robert Martello Managing Director, Global Custody and DR Operations
BNY Mellon Depositary Receipts
NEXT STEPS
• Banks and Brokers to clean up data files to proxy service providers
• Depositaries to meet with voting agents to ensure they notify clients of beneficial owners requirements
• Depositaries to continue to meet with SIFMA and other entities involved in the proxy chain to ensure a successful implementation of solutions to comply with new requirements
• Finalizing non-DTC proxy process with Euroclear, Clearstream, Broadridge International, and ISS
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V. Questions / Comments
VI. CONTACTS
ROBERT MARTELLO
MANAGING DIRECTOR, GLOBAL CUSTODY AND DR OPERATIONS
BNY MELLON DEPOSITARY RECEIPTS
PHONE: 212-815-5117
EMAIL: [email protected]
MICHAEL O’BRIEN
VICE PRESIDENT, SENIOR CORPORATE GOVERNANCE ANALYST
BNY MELLON DEPOSITARY RECEIPTS
PHONE: 212-815-6007
EMAIL: MICHAEL.O'[email protected]
MARK GHERZO
VICE PRESIDENT
CITI , GLOBAL STRUCTURING DEPT.
PHONE: 212-816-6657
EMAIL: [email protected]
BEVERLY GEORGE
VICE PRESIDENT, GLOBAL EQUITY SERVICES
TRUST AND SECURITIES SERVICES
DEUTSCHE BANK TRUST COMPANY AMERICAS
PHONE: 212 250-1504
EMAIL: [email protected]
PAUL F MARTIN
EXECUTIVE DIRECTOR, DEPOSITARY RECEIPTS CLIENT SOLUTIONS
J.P. MORGAN
PHONE: 212-552-3735
EMAIL: [email protected]
LAWRENCE CONOVER
VICE PRESIDENT
NATIONAL FINANCIAL SERVICES LLC, A FIDELITY INVESTMENT COMPANY
PHONE: 201-915-8405
EMAIL: [email protected]
STEVEN P. DAPCIC
DIRECTOR
PERSHING LLC, A BNY MELLON COMPANY
PHONE: 201-413-3853
EMAIL: [email protected]
VERONICA O’NEILL
VICE PRESIDENT
BANK OF AMERICA MERRILL LYNCH
PHONE: 1-855-259-3431, OPTION 2, THEN 3
EMAIL: RONNIE.O’[email protected]
CHIP PASFIELD
V.P. CLIENT SERVICE, BROADRIDGE FINANCIAL SOLUTIONS
PHONE: 631-254-7533
EMAIL: [email protected]
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VII. APPENDIX
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