Corporate actions for executive brokerage clients

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Corporate actions for executive brokerage clients

  1. 1. Corporate Actions for Executive Brokerage Clients BCS FINANCIAL GROUP
  2. 2. 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 2
  3. 3. 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 3
  4. 4. 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 4
  5. 5. 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. 5
  6. 6. 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. 6
  7. 7. 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. Main specifics of Russian Corporate actions are: 7
  8. 8. 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. Main specifics of Russian Corporate actions are: 8
  9. 9. 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. Main specifics of Russian Corporate actions are: 9
  10. 10. 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.” 10
  11. 11. Settlement of claims for Corporate Actions: 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. 11
  12. 12. Settlement of claims for Corporate Actions:  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 12
  13. 13. Settlement of claims for Corporate Actions:  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. ” 13
  14. 14. Settlement of claims for Corporate Actions:  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. 14
  15. 15. Settlement of claims for Corporate Actions:  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” “ 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. ” 15
  16. 16. Settlement of claims for Corporate Actions:  Classica sector of Moscow Exchange - Claims settlement Market practice • CPs provide each other with formal claim letters. • Claims are settled with cash transfers to bank details stated in claim letters. 16
  17. 17. Settlement of claims for Corporate Actions:  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. ” 17
  18. 18. Settlement of claims for Corporate Actions:  SBL Trades on Moscow Exchange - Claims settlement Market practice • CPs provide each other with formal claim letters. • Claims are settled with cash transfers to bank details stated in claim letters. 18
  19. 19. Settlement of claims for Corporate Actions: 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 “ 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. ” If CPs prefer to use any special PSAs for trades, income claims are to be described in this PSAs. 19
  20. 20. Settlement of claims for Corporate Actions: o Corporate actions claims on OTC trades - Claims settlement Market practice • CPs provide each other with formal claim letters. • Claims are settled with cash transfers to bank details stated in claim letters. 20
  21. 21. Settlement of claims for Corporate Actions: 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. 21
  22. 22. 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. “ 22
  23. 23. 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 23
  24. 24. 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 24
  25. 25. 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 25
  26. 26. 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% 26
  27. 27. 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 akashkin@msk.bcs.ru

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