Corporate Actions Reform: From Theory to Practice

23 September 2016
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On 20 September 2016, National Settlement Depository (NSD), Russia’s central securities depository, and the Independent Directors Association conducted a conference entitled “Evolution of Corporate Action Processing in Russia” in Moscow. The conference took place for the third time and was the largest one to date. The event brought together more than 350 delegates, including representatives of the regulator, professional associations, investors, registrars, and depositories, as well as corporate secretaries and IR Directors of major Russian issuers.

1 July 2016 marked a significant turning point in corporate actions reform. Provisions of the Federal Law № 210-FZ that stipulated a new procedure for corporate action processing by Russian issuers, as well as the creation of the Corporate Actions Center and Corporate Information Center (CIC), came into effect.

A few months later, securities market participants gathered together to discuss the first results of processing corporate actions based on new technology, to exchange opinions, and to plan the next steps.

Maria Krasnova, Deputy Chairman of NSD’s Executive Board, opened the conference. In her introductory remarks, she noted the event’s key topics and invited delegates to take part in discussions.

Andrei Yakushin, Head of Corporate Relations and Information Disclosure Division, Financial Market Access Department, Bank of Russia, was the next speaker. According to Mr. Yakushin, provisions of Federal Law № 210-FZ that recently came into effect can be seen as a paradigm shift in the securities market. These changes were needed long ago. Mr. Yakushin drew delegates’ attention to the fact that this conference was the first formal event after the practical implementation of corporate actions reform. He reminded attendees that this development was the result of long and arduous work by NSD (which had initiated this transformation). During this extended period, the Bank of Russia closely collaborated with the central securities depository and market participants, following implementation of the reform. The Bank also helped resolve issues related to regulation.

Reports by Larisa Gorbachyova, Head of the Securities Department of Citibank, and Vadim Protasenko, General Director of IRC, were dedicated to a new procedure for corporate actions processing. Ms. Gorbachyova, using the example of Citibank, outlined the changes that foreign securities holders experienced when the law came into effect 1 July 2016. She also shared her first impressions. Citibank’s clients welcomed the transition from paper to electronic documents. However, they assumed the role of an observer. Mr. Protasenko considered the new procedures for corporate actions processing from the point of view of registrars, and pointed out changes in the role of infrastructural companies in these procedures. He also answered questions from the delegates.

Participants in the panel discussion “Corporate Actions Reform: First Results, Operational Experience, and Development Plans” included Alexey Fedotov, Independent Director, Supervisory Board, NSD         (moderator); Tatiana Medvedeva, Senior Legal Advisor, “Center for Capital Market Development” Fund; Irina Baichorova, Managing Director of the Depository, Bank of New York Mellon; Oleg Tsvetkov, Managing Director – Head of Corporate Secretary Service, Sberbank; Boris Cherkassky, Advisor to the Managing Director, INFINITUM Asset Services; Natalia Sidorova, Head of Global Securities Services Russia, UniCredit Bank; Maxim Murashov, General Director, JSC “DRAGA”; and Svetlana Kamasheva, Managing Director, Head of Product Department, Custody, VTB Bank.

Panel discussion participants commended the corporate actions reform and noted that time was needed for changes to take root in the market. The creation of NSD’s Corporate Information Center (CIC) (launched in July) was another important discussion topic. Speakers shared their opinions on this and named weak spots – areas for development that should be taken into consideration. Maria Krasnova assured the audience that NSD continues to improve CIC.

A report by Andrey Denisov, Head of Corporate Actions Development of NSD, was dedicated to e-voting, a service developed by NSD that allows securities holders to receive documents associated with GMs, to view the video of the meeting in real time, and to vote on agenda items. Access to the е-voting service will be provided to securities holders on a special website. Mr. Denisov also announced the recent launch of a special online resource dedicated to this type of voting - www.e-vote.ru (available only in Russian).

The conference wrapped up with a report by Ivan Maksimov, Deputy Executive Director of the Association of Institutional Investors (API). The presentation covered the issue of how corporate actions reform may affect corporate governance quality. Mr. Maksimov said that there was some visible positive effect from the reform, despite the fact that the new technology for processing corporate actions was only recently launched. At the same time, he added that there were some tasks for upgrading corporate governance which might be accomplished via technologies and services that have been created as a part of corporate actions reform.

One of innovations at this event was the interactive communications format which allowed participants to see the convenience of voting electronically. Before the event, participants received remote devices to vote on key issues. The results of the voting were shown on monitors. Of particular interest, the majority of respondents (86.4%) expressed their interest in e-voting at shareholder meetings. 68.1% of guests responded positively to the question regarding the necessity of a unified voting portal for Russia’s stock market. Conference participants named legislative regulation as one factor that affects the corporate governance level of Russian companies (56.9%).

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