Corporate Actions with Foreign Securities

NSD notifies its clients of corporate actions with securities held in individual accounts with the ICSD in the same manner as information is provided for securities held in NSD's omnibus accounts. The applicable requirements to the processing of the particular corporate action are described in the relevant corporate action notification.

The more detailed description of the corporate action notification process is available in the section "Corporate Action Notifications".

Clients may participate in voluntary corporate actions (VOLU), as well as in mandatory corporate actions with options (CHOS), by choosing a preferred option of participation in the corporate action. To do this, the client has to give to NSD a corporate action instruction (68/CAIN) in one of the following formats:

Instructions for participation in foreign corporate actions notified using ISO 20022 or ISO 15022 formats may not be given in hard copy. Information on the types of corporate actions notified using ISO 20022 or ISO 15022 formats is available here.

In certain cases, to exercise the rights a client is required to give a universal instruction (transaction code – 68/CAIR0, corporate action type – OTHR).

Where a client wishes to cancel an earlier corporate actions instruction, the client must submit a request to NSD for the corporate actions instruction cancellation (68/CAIC).

As soon as the instruction or the cancellation request is processed both by NSD and the foreign depository, the client is sent a message stating the relevant status (CAIS or CACS, respectively). For the client's individual account, all status advices received from the foreign depository will be forwarded to the client.

The flowchart that describes interaction between clients and NSD in the course of acceptance and processing of corporate actions instructions and corporate actions instruction cancellation requests is available in the presentation entitled "Processing of corporate actions Instructions and corporate actions Instruction Cancellation Requests for Corporate Actions with Foreign Securities".

Message types used for the purposes of Corporate actions instruction processing:

Formats of instructions and other messages to be used in corporate actions with foreign securities are available in the Specifications of Electronic Documents Used by NSD for Corporate Actions Processing.

Examples of instructions and statuses:

Document name	File	Date published
ISO 20022 (communication channel: Web-client, LUCH)	57 kB	02.06.2016
ISO 15022 (communication channel: SWIFT)	56 kB	02.06.2016

Requirements to a corporate actions instruction

• The instruction must be completed in accordance with the terms and conditions set out in the corporate actions notification and additional materials attached to notification.
• The instruction must contain the 6-digit corporate actions reference assigned by NSD.
• For each particular corporate action, each instruction must be assigned a unique number.
• Depending on the corporate actions type and terms and conditions, the client may be required to disclose the beneficial owner of the securities, submit further documents, or comply with any other requirements described in the corporate actions Notification.
• In each instruction, it is allowed to choose one corporate actions option only.
• Instructions must be given with respect to securities sub-accounts and/or sub-registers that are used for keeping of foreign instruments, which are nonclassified as securities, under Russian legislation.

Securities sub-account types for which instructions can be given are as follows:

Corporate actions Instruction and corporate actions Instruction Cancellation Request Processing

• If the processing of the corporate action at the foreign depository requires the blocking of the securities, the securities will be blocked in the individual account with EUROCLEAR BANK.
• The securities will not be blocked in the sub-account "Securities held in an individual account with EUROCLEAR BANK". The client shall be responsible for monitoring whether the securities have been blocked by the foreign depository. NSD offers its client a possibility to sign up for a report with information on securities blocked at the foreign depository.
• Where the client participates in the corporate action, NSD does not verify whether the available securities are sufficient for execution of the instructions given by the client.
• Instructions will not be accepted before the commencement of the applicable period.
• NSD does not warrant acceptance of instructions submitted after the deadline for acceptance of instructions by NSD, and does not warrant participation in the relevant corporate action.
• Information in the instruction must be in English. Instructions that contain either information in Russian or the transliteration attribute (the apostrophe (`) character) will be sent to the foreign depository after their transliteration in accordance with the rules applied by NSD. NSD is not responsible or liable for acceptance/non-acceptance by the foreign depository/issuer/issuer's agent of instructions that contain transliterated information, or for the use of such information in the course of the corporate action processing by the issuer or its agents.
• A line feed character in text fields in instructions is not a divider. To divide text information in different lines, it is necessary to use a blank space either in the end of the first line, or in the beginning of the next line.
• Any information contained in the instruction in the narrative fields will be transmitted to the foreign depository as is, without being validated by NSD. The client shall be responsible for the accuracy and completeness of any such information.
• For the default option of a corporate action or for mandatory corporate actions (MAND), no instructions are required.
• If no instruction is received from the client with respect to a voluntary corporate action (VOLU), no action will be taken on the part of NSD with respect to the relevant securities.
• If no instruction is received from the client with respect to a mandatory corporate action with options (CHOS), the default option will be used.

For information regarding the process of exchanging Reg S securities for 144A securities (and vice versa), please see the section «Corporate Actions with Foreign Securities (Omnibus)».

SRD II (hereinafter referred to as the Directive) is a regulatory act of the European Parliament the declared goals of which are to regulate the rules for increasing the effectiveness of shareholders’ (securities holders’) involvement in governing issuers registered in the countries of the European Economic Area (EEA), regardless of shareholder’s location and the place in which the securities are recorded, on the one hand, and for extending issuers’ awareness of shareholders’ involvement in corporate governance, on the other hand. The Directive covers equity securities admitted to circulation by trade organizers in EEA states (hereinafter referred to as the Securities).

SRD II is mainly focused on regulating the process of identifying holders of Securities (hereinafter referred to as the Securities Holders) by issuers and the process of informing the Securities Holders about the conducting of general meetings of shareholders (owners) by issuers and the attendance of the Securities Holders at such meetings. SRD II requirements cover depositories (including central securities depositories) that record rights to Securities.
On 3 September 2020, SRD II will be applied in all countries of the European Economic Area.

It is possible that the list of financial instruments to which SRD II requirements are applied may be expanded in certain markets (in certain EEA countries) in accordance with local laws.

The Directive requirements are applied to NSD as a depository/central securities depository (intermediary) from jurisdictions different than the EU which provides services for safekeeping shares (recording rights to shares) of companies registered in EU countries for which shares are admitted to trading in the regulated market located or functioning in any EU state.

Disclaimer:

Information in this memorandum related to the interpretation of the Directive has been prepared based on data contained in the Directive and also based on information provided by foreign depositories. In this regard, data in this document are informational in nature. It should not be construed as giving legal advice or making a recommendation, or as information provision which imposes any legal obligations on NSD. NSD is not liable for any decisions or actions that have legal consequences that have been made (taken) by any person based on information in this document. A client shall make an independent decision on the need to assess the provisions of the Directive and their impact on client operations.

The scheme for the SRD II process for informing Securities Holders about the conducting of general meetings and the attendance (voting) of securities holders at such meetings by issuers:

The process includes:

• Transmitting a notification of the meeting by each depository that records Securities in a chain right after it receives such information from an issuer or an upstream depository, respectively;
• Verifying the number of Securities involved in a corporate action;
• Transmitting instructions by a Securities Holder to attend the meeting;
• Verifying the fact of transmitting instructions by the Securities Holder;
• Verifying the fact of receiving and registering Securities Holder instructions by the issuer.

Notifications of the meetings will include the following types of messages:

• Meeting announcement
• Meeting cancellation
• Confirmation of entitlement
• Meeting instruction
• Meeting instruction cancellation
• Meeting instruction status
• Confirmation of recording and counting the vote

Currently, the formats and interactions channels remain unchanged during the process of informing NSD clients about the conducting of meetings and the attendance (voting) at the meetings.  To structure the request, a foreign depository shall use four-symbol codes (which will reflect the appropriate data) in the additional information field with free text. This information will be transmitted unchanged to NSD clients via the foreign depository’s message (in the additional information field with free text). Special four-symbol codes shall be used when sending an instruction to participate in a CA through NSD. If these codes are not used, the instructions might be rejected by the Foreign Depository.

Information about the implementation of ISO 20022 formats will be available once data from Foreign Depositories have been received.

The scheme for the SRD II interaction process for identifying Securities Holders via the chain of depositories:

The process includes:

• The right of an issuer or its agent to request that any depository which is a part of the chain of depositories that record rights to securities disclose information about a security holder;
• A process recommended by the Directive is as follows:
• An issuer (or its agent) sends a request to a depository which is the first one in the chain of depositories that record rights to the Securities.
• Each next depository sends the request to the next depository until it is received by the depository that records the Security Holder’s rights;
• The depository that receives a request to disclose information shall respond immediately by providing information using the address of the recipient specified in the request to identify the Securities Holder.
  
  Information about the formats used will be available once data from the Foreign Depositories have been received.
  
  Disclaimer:
  
  This information has been prepared based on data contained in the Directive and also based on information provided by Foreign Depositories. In this regard, data in this document are informational in nature. It should not be construed as giving legal advice or making a recommendation, or as information provision which imposes any legal obligations on NSD.  NSD is not liable for any decisions or actions that have legal consequences that have been made (taken) by any person based on information in this document. A client shall make an independent decision on the need to assess the provisions of the Directive and their impact on client operations.
  

A procedure for identifying Securities Holders:

If NSD receives a request to identify a Securities Holder within the deadline set by the Directive, it should act as follows:

• If such a request is received from a foreign depository, NSD transmits it to the clients in which accounts these securities are kept as of the record date (or as of the date when a request for the information provision was sent), regardless of whether they are shareholders (owners) or not. Also, information about the receipt of the request is published on NSD’s website.
• NSD sends information about the clients to the request initiator in accordance with the Directive. Meanwhile, information about the ownership type will be disclosed as follows: N – information about nominee securities accounts and foreign nominee securities accounts, B – information about owner securities accounts, trustee securities accounts, and foreign authorized holder securities accounts, U – information about the accounts of unidentified persons.

A request to identify a Securities Holder is sent as part of a DSCL (Information Disclosure) corporate action. Currently, the formats and interactions channels remain unchanged during the process of informing NSD clients about the requests to identify owners. To structure the request, a foreign depository shall use four-symbol codes (which will reflect the appropriate data) in the additional information field with free text. This information will be transmitted unchanged to NSD clients via the Foreign Depository’s message (in the additional information field with free text).

More information about the formats and four-symbol codes is available in Appendix 2.

Information about implementation of ISO 20022 formats will be available once data from Foreign Depositories have been received.

Upon receipt of a request from an issuer or its authorized agent to identify Securities Holders in accordance with the Directive, in order to identify such issuer or its authorized agent NSD is following the procedure described in the section «Request for information on NSD’s clients/ final beneficiary owners directly by the issuer or its agent».

The SMPG working group concluded that only the ISO 20022 standard fully meets the SRD II requirements. As a result, the ICSDs (Euroclear Bank S.A./N.V. and Clearstream Banking S.A) has started the process of migrating to the ISO 20022 formats for those markets and instruments supporting that standard. As a securities depository that provides safekeeping/recordkeeping services of foreign assets and works closely with the ICSDs, NSD has also launched a project to migrate to the SMPG-recommended ISO 20022 standard and will later stop using the ISO 15022 standard.

Under the project, NSD proposes to use the following message types in its communications with the clients:

Roadmap of Migration to the New ISO 20022 Standard at NSD

The timeline set out in the Roadmap may change subject to foreign securities depositories’ plans.
As NSD receives up-to-date information from foreign securities depositories, the Roadmap will be updated.

Channels/software for communication in connection with the CAs covered by SRD II

Schemes and examples of XSD messages used in SRDII when identifying securities holders

1. Annotated schemas:

• Shareholders Identification Disclosure Request
• Shareholders Identification Disclosure Request Cancellation Advice
• Business Application Header

2. Examples of Shareholders Identification Disclosure Request and example of Shareholders Identification Disclosure Request Cancellation Advice:

• Example of SI Request
• Example of Previous Disclosure Request Identification
• Example of Shareholders Identification Disclosure Request Cancellation Advice (reason for cancellation – proccesing error)

3. Link to the ISO 20022 website, where the current versions of the schemes are posted: https://www.iso20022.org/iso-20022-message-definitions