Corporate Governance Principles

NSD’s Corporate Governance Principles are set out in NSD’s Corporate Governance Policy (approved by NSD’s Supervisory Board on 1 October 2019 and by the Bank of Russia on 31 October 2019), available on NSD’s official web site.

NSD applies the best corporate governance standards and practices, including those set out in NSD’s Corporate Governance Policy.

The results of compliance with the corporate governance principles set out in NSD’s Corporate Governance Policy are described in the appendix to this Report.*

In corporate governance processes, NSD also follows the principles recommended by Moscow Exchange and set out in the Moscow Exchange’s Corporate Governance Code, including the principle that requires acting in the best interests of users of services provided by Moscow Exchange Group companies, the principle of corporate social responsibility, and other principles.

The Supervisory Board is responsible for strategic management of NSD and exercises effective control over the performance of the Executive Board and the Executive Board Chairman.

• The Supervisory Board is also responsible for defining the company’s development strategy, exercising effective control over the company’s financial and business activities, and approving the company’s budgets.
• The composition of the Supervisory Board ensures the most effective performance of its functions.
• The Supervisory Board members actively participate in Supervisory Board meetings, as well as meetings of the Supervisory Board Committees.
• Supervisory Board meetings are convened on a regular basis, either in the form of inperson meetings or in the form of meetings in absentia, depending on the importance of the agenda matters and in accordance with the meeting schedule.
• The Regulations on the Supervisory Board set out, in detail, the procedure for arranging and holding Supervisory Board meetings.
• The Supervisory Board comprises the Budget Committee, the Audit Committee, the Nomination and Remuneration Committee, the Strategy Committee, and the Technological Policy and Development Committee.
• In accordance with NSD’s Articles of Association, the Supervisory Board may establish any other standing or ad-hoc committees, as well as Customer Committees responsible for certain key areas of NSD’s business in order to deal with any current issues.
• The Supervisory Board is responsible for ensuring the effective performance of the Executive Board and the Chairman of the Executive Board, as well as for exercising control over their performance.

The Executive Board and the Chairman of the Executive Board are capable of effectively and reasonably running NSD’s day-to-day operations, in good faith and in the best interests of NSD.

• In accordance with NSD’s Articles of Association, the Executive Board is authorized to deal with the most complex issues arising in the company’s day-to-day operations.
• The composition of the Executive Board ensures that NSD’s executive bodies carry out their functions most effectively.

NSD assesses its corporate governance system in accordance with the Bank of Russia’s recommendations laid down in its Letter No. 11-T dated 7 February 2007 «On the Corporate Governance Assessment Questionnaire for Credit Organizations».

In accordance with clause 12.3.26.9 of NSD’s Articles of Association, the company’s corporate governance system is assessed on at least an annual basis. In 2020, NSD’s corporate governance system was assessed, and upon completion of the assessment, a corporate governance report was prepared and approved by the Supervisory Board.

Supervisory Board’s Performance Report for 2020

In 2020, as in the previous years, a number of foreign experts were among the Supervisory Board members to ensure that its decision-making process takes global trends and expertise into account.

The Supervisory Board performed the overall management of NSD’s operations and held 15 meetings during the reporting year, including six in-person meetings.

At its meetings, the Supervisory Board addressed and took decisions on key issues relating to NSD’s financial and business activities and business development, including the following:

• review and discussion of NSD’s preliminary Performance Report for 2020;
• approval of NSD’s Budget (Business Plan) 2021−2023;
• preliminary approval of NSD’s Annual Report for 2019;
• approval of the fees payable to NSD’s independent auditor;
• amendments to NSD’s Fee Schedules;
• review and discussion of the Progress Report on the Implementation of the NSD Development Strategy in 2019;
• addressing various matters relating to the implementation of the project «Pension Operator of the Guaranteed Pension Plan»;
• review and discussion of various matters relating to the implementation of the Project Program «Ensuring NSD’s Compliance with the Requirements of the GOST R 57580 Standard and Federal Law 152-FZ»
• review of NSD’s performance reports prepared by NSD’s Executive Board;
• addressing various matters relating to remuneration of the members of NSD’s executive bodies;
• review and discussion of the Moscow Exchange Group’s Risk Management System Development Strategy 2024.

Also, the Supervisory Board gave a great deal of attention to addressing and deciding on issues of corporate governance at NSD, in particular:

• assessment of the state of corporate governance at NSD;
• assessment of NSD’s internal control system;
• election of members of NSD’s Executive Board, and authorizing Executive Board members to hold positions in management bodies of other organizations;
• resignation of the Chairman of NSD’s Executive Board and appointment of the Acting Chairman of NSD’s Executive Board;
• convocation of the annual General Meeting of Shareholders in 2020;
• recommendations to the annual General Meeting of Shareholders in 2020;
• convocation of NSD’s extraordinary General Meeting of Shareholders held on 9 April 2020;
• recommendations to the extraordinary General Meeting of Shareholders held on 9 April 2020; and
• election of new members of Supervisory Board Committees and Customer Committees.

In addition, decisions were taken on issues relating to NSD’s operational efficiency and amendments to, and approval of, NSD’s internal regulations, including the following issues:

• review of reports submitted by NSD’s Internal Control and Internal Audit Departments, approval of the Internal Audit Department’s work plan for 2021;
• review and discussion of the findings of the audit of NSD by the Bank of Russia and of a plan of actions to address and prevent re-occurrence of the violations identified by the audit
• assessment of risks and of the effectiveness of risk management at NSD;
• review of stress testing and ICAAP reports;
• review of the report on the implementation of NSD’s Risk Management Development Strategy for 2019;
• approval of NSD’s risk management priorities for 2020−2021;
• review of the Executive Board Chairman’s report regarding management of the Trade Repository’s regulatory risk for 2019;
• review of NSD’s Customer Satisfaction Index Report;
• approval of the estimated level of NSD’s economic capital for 2020;
• approval of NSD’s Key Performance Indicators for 2020;
• approval of NSD’s corporate Key Performance Indicators for 2021;
• approval of NSD’s internal regulations, including:
  • amended and restated Information Security Policy;
  • amended and restated Clearing Rules;
  • amended and restated Information Protection Rules;
  • amended and restated Internal Control Rules on Anti-Money Laundering, Combating the Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction;
  • amended and restated Risk and Capital Management Strategy;
  • Regulations on the Central Securities Depository Customer Committee;
  • Regulations on Bonus Payment for the Purposes of NSD’s Employees' Participation in the Long-Term Moscow Exchange Share-Based Incentive Program
  • amended and restated Terms of Transactions in Financial Instruments of Persons Considered to be NSD’s Insiders and Persons Related to Them;
  • amended and restated Terms and Conditions of Depository Operations;
  • amended and restated internal regulations that govern employee compensation;
  • amended and restated Regulations on NSD’s Internal Audit Department;
  • amended and restated Pricing Policy;
  • amendments to the Regulations on NSD’s Customer Committees.

NSD’s Corporate Governance Structure

NSD’s Management Bodies

Committees and Commissions

Additional information regarding NSD’s Committees and Commissions is available on page 64 of this Report.

Internal Audit Commission

Supervisory Board Committees

Customer Committees of the Supervisory Board

Committees of the Executive Board

Committees of the Chairperson of the Executive Board

Supervisory Board members elected at the annual General Meeting of Shareholders on 30 May 2019*

Supervisory Board members elected at the annual General Meeting of Shareholders on 2 June 2020. Information on the Supervisory Board Members*

Eddie Astanin

Date of birth:

16 December 1961

Education:

• 1984. Mozhaisky Military Engineering Institute
• 1996. Institute for Further Training and Qualification Upgrade in Finance and Banking at the Finance Academy under the Government of the Russian Federation.
• 1992. Ph.D. in Engineering Sciences.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Svetlana Balanova

Date of birth:

5 October 1970

Education:

• 1992. Moscow State Linguistic University (The Maurice Thorez Institute of Foreign Languages)
• 2000. Open University Business School (UK).
• 2019. Institute of Directors-IoD, UK.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Paul Anne F. Bodart

Date of birth:

22 January 1953

Education:

• 1976. Université Catholique de Louvain, Belgium.
• 1986. INSEAD, Fontainebleau, France.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Mikhail Bratanov

Date of birth:

16 May 1973

Education:

• 1996. Moscow Institute of Electronic Technology (Technical University) (MIET).
• 2003. Moscow Institute of Electronic Technology (Technical University) (MIET), post-graduate course, Ph.D. (Economics).
• 2011. The Moscow School of Management SKOLKOVO, Executive MBA.
• 2014: Institute of Directors (IoD), London, Great Britain, Cert IoD, Dip IoD,
• 2017: IoD Chartered Director.
• 2019. Centre for Effective Dispute Resolution, UK.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Yury Denisov

Date of birth:

31 May 1970

Education:

• 1993. Moscow State Institute of International Relations of the Ministry of Foreign Affairs of Russia.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Bella Zlatkis

Date of birth:

5 July 1948

Education:

• 1970. Moscow Finance Institute.
• 1978. All-Union Correspondence Financial Institute, post-graduate course.
• Ph.D. (Economics).

Positions held in the last 5 years, including membership in other organizations' management bodies:

Oksana Loginova

Independent director

Date of birth:

18 October 1970

Education:

• 1993. Lomonosov Moscow State University
• 2018. University of Oxford, UK, Diploma in Strategy & Innovation
• 2004. Swinburne University, Australia, МВА
• 2019. Institute of Directors-IoD, UK

Positions held in the last 5 years, including membership in other organizations' management bodies:

Sergey Lykov

Date of birth:

12 December 1952

Education:

• 1975. Moscow Finance Institute.
• 1988. All-Union Distance Institute of Finance and Economics, post-graduate course, Ph.D. (Economics).

Positions held in the last 5 years, including membership in other organizations' management bodies:

Paul James Ostling

Independent director

Date of birth:

22 September 1948

Education:

• 1969. Fordham University (Mathematics, Philosophy).
• 1973. Fordham University School of Law.
• 1973. Academic degree: JD Cum Laude.
• 1983. Harvard University, advanced management program.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Anton Ostrovskiy

Independent director

Date of birth:

14 February 1971

Education:

• 1993. Moscow State Institute of International Relations of the Ministry of Foreign Affairs of Russia.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Andrey Popov

Independent director

Date of birth:

21 January 1973

Education:

• 1995. Truman State University (Missouri, USA).
• 1996. Finance Academy under the Government of the Russian Federation.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Nadezhda Ushakova

Independent director*

Date of birth:

6 February 1967

Education:

• 1989. State Finance Academy.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Ilya Yuzhanov

Independent director

Date of birth:

7 February 1960

Education:

• 1982. Leningrad State University
• 1989. Ph.D. (Economics).
• 2013. Institute of Directors, UK, IoD Chartered Director.

Positions held in the last 5 years, including membership in other organizations' management bodies:

The members of the Supervisory Board do not own any shares in NSD.

Information on the Executive Board Members

Eddie Astanin*

Date of birth:

16 December 1961

Education:

• 1984. Mozhaisky Military Engineering Institute.
• 1996. Institute for Further Training and Qualification Upgrade in Finance and Banking at the Finance Academy under the Government of the Russian Federation.
• 1992. Ph.D. in Engineering Sciences.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Maria Krasnova

Date of birth:

13 February 1970

Education:

• 1992. Lomonosov Moscow State University.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Irina Antonova*

Date of birth:

13 April 1965

Education:

• 1988. Plekhanov Moscow Institute of National Economy

Positions held in the last 5 years, including membership in other organizations' management bodies:

Pavel Andrianov*

Date of birth:

20 June 1972

Education:

• 1995. Moscow State Aviation Institute (Technical University)

Positions held in the last 5 years, including membership in other organizations' management bodies:

Irina Veremeenko

Date of birth:

24 May 1965

Education:

• 1987. Moscow Finance Institute.

Positions held in the last 5 years, including membership in other organizations' management bodies:

Andrey Shlyappo

Date of birth:

12 September 1968

Education:

• 1998. Moscow State Institute of Steel and Alloys (Technological University).

Positions held in the last 5 years, including membership in other organizations' management bodies:

The members of the Executive Board do not own any shares in NSD.

Shareholders

On 21 November 2019, NSD’s shareholders signed the amended and restated Shareholders Agreement with respect to NSD, and NSD became a party to the Shareholders Agreement. Moscow Exchange holds a 99.997% interest in NSD’s share capital, while each of the other 33 shareholders (banks, brokerage firms, registrars, Republican Unitary Enterprise «Republican Central Securities Depository» (Republic of Belarus), and ICSDs (Euroclear Bank SA/NV и Clearstream Banking S.A.)) holds one share. The full list of NSD’s shareholders is posted on NSD’s web site at www.nsd.ru/en/about/korporativnoe-upravlenie/aktsionery/ . Thanks to such shareholder structure, the Shareholders Agreement strikes a balance between shareholders' interests and interests of NSD’s service users.

The Shareholders Agreement needed to be amended and restated to reflect certain changes in Russian laws and regulations applicable to the CSD. Besides, since the execution of the previous Shareholders Agreement in 2011, NSD, in addition to acting as CSD, has taken a number of other infrastructure roles, including those of a systemically important trade repository and a nationally important payment system, all of which required to update the Shareholders Agreement. The Shareholders Agreement demonstrates that the Moscow Exchange Group is willing to establish a corporate governance system that is transparent to securities market participants.

Because certain international central securities depositories became shareholders in 2014, NSD is now able to position itself as a Eurasian (regional) international central securities depository. This allows NSD to offer foreign investors CSD services for execution of transactions in securities of Russian or other CIS issuers, and also to offer investors from CIS countries services for execution of transactions in foreign securities through accounts held by international or CIS CSDs with NSD.

The presence of foreign infrastructure institutions among NSD’s shareholders demonstrates that Russia’s central securities depository is recognized in the global arena and that its corporate governance system is trusted.

General Meeting of Shareholders

The proceedings of General Meetings of Shareholders are governed by the Rules of Procedure of NSD’s General Meeting of Shareholders approved by the General Meeting.

On 2 June 2020, the annual General Meeting of Shareholders approved NSD’s Annual Report for 2019 and appointed NSD’s external auditor. In addition, the General Meeting addressed such matters as profit distribution and dividend payment for 2019, elected the new members of the Supervisory Board and Internal Audit Commission, took decisions on remuneration of the Supervisory Board members, and approved the amended and restated Regulations on NSD’s Supervisory Board.

In 2020, two extraordinary General Meetings of Shareholders were held:

• the first one held on 22 January 2020 approved amendments to NSD’s Articles of Association and approved the amended and restated Regulations on NSD’s Supervisory Board;
• the second one held on 9 April 2020 resolved to distribute NSD’s retained earnings of previous years as dividends.

Registrar

The Registrar maintaining the share register of NSD is Registrar Society «STATUS» Joint-Stock Company.

Report on the Payment of Declared (Accrued) Dividends on the Shares in NSD

In accordance with Federal Law No. 208-FZ dated 26 December 1995 «On Joint-Stock Companies», a company may declare dividends on its issued and outstanding shares and is required to pay the dividends so declared.

The extraordinary General Meeting of Shareholders held on 9 April 2020 passed the following resolutions in relation to dividend payment to NSD’s shareholders:

1. Distribute NSD’s prior years' retained earnings as follows: allocate RUB 1.85 billion for paying dividends to NSD’s shareholders.
2. Determine the dividend amount of RUB 1,566.9 per NSD’s registered ordinary share before dividend income tax under Article 284 (sub-paragraph 1, paragraph 3) of the Tax Code of the Russian Federation.
3. Approve the date of 20 April 2020 as the record date for the payment of dividends.
4. Pay the dividends within the time limits required by the Russian laws.

The dividends were paid in full and within the prescribed timeframe.

The annual General Meeting of Shareholders held on 2 June 2020 passed the following resolutions:

1. Not distribute NSD’s net profit for reporting year 2019 amounting to RUB 3,707,094 thousand, which shall be retained by NSD at its disposal.
2. Neither declare, nor pay dividends out of NSD’s net profit for reporting year 2019.

Remuneration of NSD’s Supervisory Board Members

In accordance with the Federal Law «On Joint-Stock Companies», the General Meeting of Shareholders may resolve to pay remuneration to Supervisory Board members during their term in office. The amount of such remuneration is to be approved by the General Meeting of Shareholders in accordance with NSD’s Supervisory Board Members' Remuneration and Expenses Reimbursement Regulations.

In determining the amount of remuneration payable to Supervisory Board members, the following factors are taken into account:

• independent director status;
• the exercise of functions of Chairperson / Deputy Chairperson of the Supervisory Board;
• Supervisory Board Committee membership;
• the exercise of functions of Supervisory Board Committee Chairperson; and
• attendance at in-person Supervisory Board meetings and meetings of Supervisory Board Committees.

The total remuneration paid in 2020 to the Supervisory Board members amounted to RUB 80,197 thousand, including RUB 41,371 thousand paid to the independent directors.

Remuneration of NSD’s Executive Board Members

ВIn accordance with NSD’s Articles of Association, the amount of remuneration is approved by the Supervisory Board.

Remuneration payable to the Executive Board members comprises three components:

• Monthly remuneration (salary) payable for the performance of duties under the employment contract;
• Performance-based remuneration. Key performance indicators are set by the Supervisory Board in accordance with the recommendations made by the Nomination and Remuneration Committee of the Supervisory Board. Individual key performance indicators are set for each Executive Board member, and the amount of remuneration payable to that member depends on whether the KPIs are achieved; and
• Moscow Exchange Share-Based Long-Term Incentive Plan.

NSD’s Supervisory Board Committees and Other Committees

Audit Committee

Mission:

The Audit Committee’s role is to ensure efficient work of NSD’s Supervisory Board in organizing the internal control and external audit system, as well as risk management at NSD.

In 2020, NSD faced such global challenges as COVID and the need to transition most employees to remote work and to implement proper controls. Throughout the reporting year, the Audit Committee and NSD’s business units, operating and control departments were actively involved in addressing these challenges. Despite the continuing volatility caused by the underlying factors, NSD continued to display stability in providing clients services. As part of the regular review process and tender procedures, the ad hoc commission established by the Moscow Exchange Group to select service providers took a decision to replace the external auditor for 2021. In 2020, NSD’s control departments started using a standardized system designed for risk management and for addressing controversies within NSD to improve the effectiveness of those processes. To find an optimal solution, the Audit Committee took part in formulating principles of effective cooperation between the Moscow Exchange Group companies' departments in charge of risk management, internal audit, and internal control.

Members (as of 31 December 2020):

Highlights of the year:

In 2020, the Audit Committee held 12 meetings and dealt with 66 issues.

At its meetings, the Audit Committee mainly reviewed regular reports of the Risk Management, Internal Audit, and Internal Control Departments and of the Information Security Division; matters relating to internal risk management, control, and audit processes; and external audit findings (encompassing audit of NSD’s financial statements and operational audit).

Key objectives in 2021:

Geopolitical and cybersecurity risks will remain key risks in 2021 along with risks relating to new areas of business, which normally require involvement of the Audit Committee in establishing whether proper risk management measures and controls are in place. The Audit Committee will also focus on ESG factors and related operational risks to ensure NSD’s future sustainable development.

In 2021, the Audit Committee will continue coordinating the work of risk management, internal audit, and internal control functions within the Moscow Exchange Group to enable them to achieve synergy at the Group level, while maintaining proper independence and ensuring compliance with all applicable statutory requirements.

Budget Committee

Mission:

The Budget Committee’s role is to improve the efficiency of NSD’s Supervisory Board by ensuring proper control over the way funds are received and spent at NSD. The Committee thoroughly prepares materials to be considered at NSD’s Supervisory Board meetings on matters relating to financial planning and financial resources management at NSD.

Members (as of 31 December 2020):

Highlights of the year:

In 2020, the Committee held 9 meetings.

The priorities for the Committee were various matters relating to NSD’s budgeting and budget implementation processes; approval of fees for NSD’s services; and approval of the amount of NSD’s economic capital and dividends payable to NSD’s shareholders.

In addition to addressing usual matters, the Committee achieved the following two key objectives: first and foremost, transition from the standard annual budgeting process to flexible three-year business planning; and second and equally important, transition to a new strategic benchmark in determining the amount of economic capital, i.e., economic capital under stressed conditions instead of the target level of economic capital. Both achievements contribute to greater confidence in maintaining NSD’s financial strength and provide enhanced tools for making management decisions in furtherance of the NSD Development Strategy 2024 approved by NSD’s Supervisory Board.

In 2021, the Committee will focus on implementing and updating NSD’s three-year business plan, monitoring and achievement of financial KPIs (both Group-wide KPIs and NSD’s specific KPIs), the Free Cash Flow situation, and revision of fees for the ‘Registrar of Financial Transactions' and ‘Pension Operator of the Guaranteed Pension Plan' projects.

Nomination and Remuneration Committee

Mission:

In-depth analysis of matters relating to the recruitment, assessment and remuneration of NSD’s senior managers, including Supervisory Board members, the Chairman of the Executive Board, Executive Board members, and other key employees and members of the Internal Audit Commission, and preparation of materials to be considered at Supervisory Board meetings.

Members (as of 31 December 2020):

Highlights of the year:

In 2020, the Committee held 8 meetings at which the Committee members made recommendations concerning the composition of NSD’s Executive Board and remuneration payable to the Executive Board members, as well as recommendations as to:

• new nominees to the Supervisory Board to be elected at the annual General Meeting in 2020;
• NSD’s Key Performance Indicators (KPI) for 2020 and assessment of the achievement of NSD’s KPIs for 2019;
• remuneration of the Chairman of the Executive Board and Executive Board members for 2019, and remuneration of the heads of the business units in charge of internal control and risk management;
• resignation of the Chairman of NSD’s Executive Board and appointment of the Acting Chairman of NSD’s Executive Board;
• updating NSD’s employee compensation plans in accordance with Bank of Russia’s Instruction No. 154-I dated 17 June 2014; and
• NSD’s corporate Key Performance Indicators for 2021.

The Committee Chairman coordinated efforts to assess the state of corporate governance at NSD based on the results of 2019.

Technological Policy and Development Committee

Mission:

Analysis of development of NSD’s IT systems to ensure they meet the needs of financial markets participants, and making recommendations to the Supervisory Board and the Executive Board on matters relating to the technological policy concerning the creation, maintenance, operation, and development of such IT systems.

Members (as of 31 December 2020):

Highlights of the year:

In 2020, the Committee held two meetings to address IT architecture modernization of NSD’s Alameda system used for depository and clearing recordkeeping purposes.

It is expected that throughout 2021, the Committee will focus on implementing and updating NSD’s IT strategy and taking part in expert discussions of various other matters relating to technology development at NSD, including revision of NSD’s Technological Policy, feasibility study of the initiative to establish a Group-wide center of expertise in artificial intelligence and machine learning, and approval of a solution to be selected for NSD’s payment system.

Strategy Committee

Mission:

Making recommendations to NSD’s Supervisory Board as to the worst-case, baseline, and best-case scenarios and the strategy of NSD’s development for a new period.

Members (as of 31 December 2020):

Highlights of the year:

In 2020, the Committee held five meetings.

At its meetings, the Committee regularly analyzed the impact of COVID on NSD’s business and strategic initiatives and assessed the need to adjust the NSD Development Strategy.

In particular, the Committee addressed the following matters:

• The progress report on the Implementation of the NSD Development Strategy in 2019. The implementation of the NSD Development Strategy in 2019 was found to be satisfactory
• The report on the Implementation of NSD’s Risk Management Development Strategy. The Committee also approved the risk management priorities for 2020−2021.
• The findings of the internal audit of the NSD Development Strategy 2019−2024 by NSD’s Internal Audit Department. The audit revealed no shortcomings that posed a high level of risk.
• The possible implications and impacts of external shocks on NSD’s performance. Overall, the manifestation of external shocks did not significantly affect NSD’s business in 2020. The need to adjust the NSD Development Strategy on an urgent basis was not identified.
• Ensuring the robustness and evolution of NSD’s products and services amid the pandemic. The Committee approved the proposed approach to operate NSD’s business in the context of the pandemic.

The status of the different strategic initiatives was monitored on a regular basis:

• The initiative to become the Operator of the Guaranteed Pension Plan (GPP);
• The initiative to become a central Registrar of Financial Transactions (RoFT);
• The Transit 2.0 Initiative to develop a financial messaging system’s service bureau for communications between companies and their banks;
• The initiative to continue to develop and diversify NSD collateral management suite of services and systems;
• The initiative to develop links with foreign markets and foreign CSDs with a double objective: support Russian investors willing to invest in foreign assets; support foreign investors willing to invest in Russian assets;
• The initiative to strengthen NSD information security framework and systems.

The Committee also discussed and approved plans of actions for the following prospective initiatives:

• The initiative to become infrastructure for digital assets;
• The initiative to develop a Marketplace for OFZ-N (federal loan bonds for individuals);
• The initiative to support settlement of transactions in the commodity markets;
• Modernization of the core system infrastructure («Alameda») of NSD.

In 2021, the Committee will continue to monitor the progress on all the initiatives included in the NSD Development Strategy 2019−2024 and the new prospective initiatives launched in 2020. The Committee will review the progress report on the implementation of the NSD Development Strategy in 2020.

The Committee will also assess possible new initiatives. A particular emphasis will be made on:

• The possible evolution of the operating model of the organization, leveraging the lessons learned from the pandemic crisis;
• The possible need to adjust the current Development Strategy to take into account changes observed in the Russian financial markets and possible external shocks;
• The possible need to adjust the existing Development Strategy to take into account the global evolution toward a more ESG compliant and climate-friendly world.

Customer Committees of the Supervisory Board

Central Securities Depository Customer Committee

Mission:

The Committee is responsible to review and approve internal regulations (amendments thereto) of NSD as central securities depository, including regulations that require approval by the Bank of Russia.

Chairperson:

Svetlana Kamasheva, Vice President, Head of Depository’s New Product Development Department, VTB Bank (PJSC)*.

Highlights of the year:

In 2020, the Committee held three meetings at which the Committee elected its Chairperson and Deputy Chairperson, approved the fee schedule for CSD’s services, and the amended and restated Terms and Conditions of Depository Operations of National Settlement Depository.

Customer Committee for Quality Control and Risk Management

Mission:

The key role of the Customer Committee for Quality Control and Risk Management is to make recommendations to NSD’s Supervisory Board and executive bodies on the following matters:

• NSD’s customer policy, in particular a client onboarding process and servicing principles applicable to various client categories;
• NSD’s marketing policy in promoting its services;
• improving customer services and ensuring control over their quality, including in the field of software, hardware and technological support of NSD’s activities;
• improving products and services offered by NSD;
• reducing NSD’s operational risks in delivering services;
• informing NSD’s customers about new products and services, and supporting the promotion of such services in the financial services market; and
• approving internal regulations relating to NSD’s clearing operations.

Chairperson:

Vladimir Itunin, Head of Operations, Alfa-Bank.

Highlights of the year:

In 2020, the Committee held one meeting at which the Committee elected its Deputy Chairperson. At the meeting, the Committee also reviewed and discussed NSD’s report on Customer Satisfaction Index in 2019, information concerning the risk management system, and the steps taken to ensure NSD’s business continuity in the pandemic environment.

Customer Committee for Settlement and Depository Services and Tariffs

Mission:

The key functions of the Customer Committee for Settlement and Depository Services and Tariffs are as follows:

• liaising with financial market participants for the purpose of studying customers' needs and analyzing new market trends; and
• making recommendations to NSD’s Supervisory Board and executive bodies on the following matters:
  • development of depository and settlement services and products;
  • development and standardization of a pricing model;
  • marketing policy aimed at offering competitive services; and
  • other matters directly relating to NSD’s Development Strategy.

Chairperson:

Ksenia Vlasova, Head of Operations, Business Support Department, Aton LLC.

Highlights of the year:

In 2020, the Committee held three meetings at which the Committee addressed transition from Luch software to the Web-client solution for interchanging untyped messages between NSD and its clients, the data standard for depository statements in the XML format, and a number of legislative initiatives proposed by NSD:

• The initiative to make amendments to laws to allow foreign nominee holders to open special bank accounts intended to hold cash funds of their customers, with such cash funds being protected against any restrictive and/or enforcement measures that can be taken against the account owner.
• The initiative to make amendments to the Federal Law «On Foreign Exchange Regulation and Foreign Exchange Control» to add transactions relating to the exercise of rights attached to non-Russian securities and the exercise/performance of related rights/obligations to the list of permissible foreign-currency transactions between Russian residents.
• The initiative to make amendments to laws to implement a single approach to the conduct of bonds-related corporate actions.

Customer Committee for Registrar and Depository Relations

Mission:

The key functions of the Customer Committee for Registrar and Depository Relations are as follows:

• making recommendations to improve NSD’s existing relations with registrars that maintain registers of registered securities holders, and with specialized depositories that maintain registers of UIT unit holders;
• making proposals to change NSD’s communication technologies being used to interact with registrars, including electronic data interchange technologies;
• making proposals to design new technologies to improve the quality of NSD’s relations with registrars and specialized depositories; and
• addressing any other matters relating to the Committee’s tasks and objectives.

Chairperson:

Vadim Protasenko, First Deputy General Director, JSC Independent Registrar Company R.O.S.T.

Highlights of the year:

In 2020, the Committee held two meetings at which the Committee discussed various issues arising in the course of interaction between NSD and its counterparties in the course of securities buy-backs in view of the amendments made to the Russian Tax Code, as well as the progress in changing the format of a list of holders of registered securities, and transition to a new format for electronic messages.

Committees of the Executive Board

Risk Management Committee

Mission:

The Risk Management Committee’s role is to provide assistance to the Executive Board in the field of corporate risk management. The Committee focuses on improving and strengthening risk management at NSD and ensuring immediate response to critical risks.

Chairperson:

Maria Krasnova, Acting Chairman of the Executive Board, NSD.

Highlights of the year:

In 2020, the Committee held 12 meetings, at which the Committee members addressed a number of matters relating to operational reliability of NSD’s services, operation and development of the risk management system, business continuity, and information security. In particular, the Committee focused on the following matters:

• steps aimed at enhancing the level of NSD’s cyber security;
• information security testing;
• progress in the implementation of the business continuity and disaster recovery plans and plans for building resilient infrastructure;
• acceptance of risks in NSD’s ongoing operations; and
• findings of investigations into the causes and circumstances of material incidents in NSD’s operations, and steps taken to prevent their re-occurrence.

The outcomes of Committee meetings are regularly reported to the Executive Board.

Risk Management Committee for Payment System

Mission:

The Committee makes recommendations in the field of risk management in the NSD Payment System, including recommendations as to the eligibility criteria for participation in the NSD Payment System, requirements to payment infrastructure service providers, and issues of information security in the NSD Payment System.

Chairperson:

Viktor Utkin, a representative of Alfa-Bank.

Highlights of the year:

In 2020, the Committee held one meeting at which the Committee reviewed and discussed the Report «Ensuring Business Continuity of NSD and NSD Payment System in the Novel Coronavirus Environment» presented by Andrey Lazutkin, Head of NSD’s Business Continuity Service.

Tender Committee

Mission:

Securing the best terms for procuring goods, services, and works needed to support NSD’s operations, and minimizing the risk of NSD’s contractors failing to deliver.

Chairperson:

Timofey Sklyarov, Head of NSD’s Security Division*.

Highlights of the year:

In 2020, the Committee held 33 meetings, addressing more than 100 matters and taking decisions on 79 procurement contracts. Most procurement contracts were applied for by the Administrative Affairs Division for the purposes of fitting out NSD’s office building, and by IT units to purchase or extend software licences.

Product and Project Committee

Mission:

The Committee was set up to manage project activities at NSD, including the development of new products and services. The Committee’s key role is to assist the Executive Board in deciding on the project and product management of the company and to ensure that the project implementation complies with management policies and regulations.

Chairperson:

Irina Veremeenko, Chief Accountant, Director of Accounting and Reporting Department, Executive Board member.

Highlights of the year:

In 2020, the Committee held 24 meetings, at which the Committee discussed the following projects: modernization of the joint-stock company reorganization process; building a resilient IT infrastructure; WEB-client for banking services; NSD’s adaptation to the CSDR and SRD II; NSD’s migration to the new platform SVED ECOS (Alfresco); transit service for financial notifications; etc.

The following matters were addressed by the Committee:

1) Launch of pre-project stages;

2) Requests to change pre-project parameters;

3) Requests to change project parameters;

4) Project completion;

5) Closure of pre-project stages (without proceeding to further implementation);

6) Formulating recommendations to NSD’s Executive Board to start implementation of projects;

7) Suspension of pre-project stages;

8) Monthly project progress reports;

9) Project status reports;

10) Changes to project organizational structures;

11) Proposals to make changes to the Committee composition.

Repository Services Customer Committee

Mission:

The Committee’s primary role is to review and pre-approve NSD’s internal regulations relating to NSD’s trade repository operations, as well as to consider proposals and formulate recommendations for development and improvement of trade repository operations. The Committee comprises two sub-committees: the Trade Repository Sub-committee and the RoFT Sub-committee.

Chairperson:

Ekaterina Merk, Head of Regulatory Reporting, Investment Operations Support Directorate, AO «ALFA-BANK»*.

Highlights of the year:

In 2020, the Committee held 4 meetings at which the Committee approved the amended and restated Rules for the Provision of Repository Services by NSD and the new Fee Schedule for repository services.

Committee on the Development of Corporate Actions and Corporate Information Center

Mission:

The Committee’s primary role is to consider proposals and make recommendations to NSD’s Executive Board for the development of the Corporate Actions and Corporate Information Center.

Chairperson:

Natalia Shtalenkova, Head of Product Development Division, Depository Services Department, Commercial Bank «J.P. Morgan Bank International» (Limited Liability Company).

Highlights of the year:

In 2020, the Committee did not meet.

Securities Services Development Committee

Mission:

Considering proposals and formulating recommendations on various issues associated with NSD’s securities services.

Chairperson of the Committee:

Viktor Volgarev, Director of Finance and Development, VEB.RF.

Highlights of the year:

In 2020, the Committee did not meet.

Committees of the Chairperson of the Executive Board

Change Management Committee

Mission:

The Committee’s key role is to mitigate the negative impact that software updates have on the quality of services provided to NSD’s clients. The Committee’s objectives are analysis of whether control measures used or planned in connection with software updates are adequate; and development of measures to mitigate the risk of the negative impact that the software updates have on the quality of services.

Chairperson:

Andrey Shlyappo, Deputy Chairman of the Executive Board, Executive Board member.

Highlights of the year:

In 2020, the Committee held 15 meetings to discuss matters relating to the installation of software releases, as well as to the assessment of non-project-related requests.

Architectural Committee

Mission:

The Architectural Committee’s key responsibilities are as follows:

• making proposals to ensure failure-free and reliable operation of electronic systems and IT infrastructure critical for NSD’s business; and
• making proposals to ensure competitive advantages and leadership for NSD by developing and monitoring the implementation of the IT strategy, introducing and using advanced and promising settlement, depository, and clearing technologies to address tasks set before NSD.

Chairperson:

Pavel Andrianov

Highlights of the year:

In 2020, the Committee held 18 meetings, at which the Committee, in particular, addressed such matters as preparation and approval of the plan of development and IT architecture concept of Alameda system; results of pilot testing of NSD’s SVED application solution on the Alfresco platform; integration between MOEX Treasury and Transit 2.0; and the concept of NSD’s microservices platform.