WHAT TO DO WITH RUSSIAN ADRS?
Investors fear for their money in Russian shares.
Currently, holders of Russian Depositary Receipts (so-called depositary receipts) are requested to exchange them for the underlying original shares. However, a functioning exchange process has not yet been established.
The purpose of depositary receipts is to make shares that are not tradable abroad nevertheless tradable there. The background to this permissible detour is the different requirements of national legislators for listing shares on different trading venues.
Russian DRs are also depository receipts that certify the right to ownership of a share. The depository receipts are issued by so-called DR program banks (also issuers), mostly leading international investment banks such as Bank of New York Mellon (BNYM), Citi Bank or JP Morgan.
In April 2022, the Russian legislature ordered the termination of all DR programs. As of April 27, 2022, DR holders cannot exercise voting rights or receive dividends on the underlying shares. However, unpaid dividends can be claimed by a DR holder after returning the DRs and receiving the underlying shares.
TRADING OPTIONS FOR INVESTORS
Clearstream, the international central securities depository, announced on 13/07/2022 that it will resume the exchange of depositary receipts (ADRs / GDRs) as of 18/07/2022. However, the time frame is tight: the exchange is to be possible up to and including 31.07.2022. The background is that the Russian Central Securities Depository (NSD – Russian Securities Depository) has announced that it will not charge any fees during this period.
After that, it still remains to try the second way:
- opening a securities deposit account for the converted ordinary shares.
a) with a foreign depositary bank acting as a foreign nominee bank
b) with a Russian depositary bank
- transfer of DRs to BNY Mellon’s deposit account with the Depositary Trust Company (DTC)
- order transmission to BNY Mellon for conversion of DRs and transfer of the converted ordinary shares to the securities account
- posting of the converted ordinary shares to the securities account.
Basically, we mean: Do not be put off by absurdly short deadlines that your custodian bank may set for you. From today’s perspective, the conversion of your depositary receipts is possible at least until October 12, 2022.
At present, however, any forecast is difficult. All further information as well as our mandate documents can be found here.