Foreign securities blocked: solutions
Blocked foreign securities was the centrepiece of discussion at the meeting of the Expert Board for Retail Investors Protection. The Bank of Russia representatives stressed there was no way to unblock foreign securities quickly.
However, a number of measures are being implemented to solve the problem of the blocked foreign securities with Russian roots, that are securities issued by Russian companies under foreign laws and traded on foreign exchanges.
Namely, it was decided to arrange the direct payment of yields and the exchange of depositary receipts for Russian shares without participation of a foreign entity. Also, it became possible to exchange eurobonds for Russian bonds. It is discussed whether it is expedient to resume transactions with the units of Unit Investment Funds (UIFs) and simultaneously retain the rights of investors to their share in the blocked assets of such funds.
Moreover, the Bank of Russia encourages the initiation of legal actions to unblock the assets. Other possible activities to release the blocked foreign securities will depend on the prospects of cooperation with foreign regulators and courts. Additionally, the Bank of Russia supports the Moscow Exchange in its effort to establish an Investor Protection Club together with market participants.
The total amount of blocked foreign assets is 6 trillion rubles. Investors are unable to sell these securities on exchanges and receive dividends from them. However, such assets may be traded in the OTC market between clients within the Russian depository system. A demand for such papers is moderate. They are priced lower than securities free of such blocking.
In 2022 H1, the Bank of Russia recorded a sharp rise in the number of complaints filed by retail investors against professional securities market participants — primarily brokers (4,775 complaints were filed against them in April vs 174 in February). More than a half of such applications were related to the transfer of assets from a sanctioned broker to another professional securities market participant, while 19% of the complaints were about the asset blocking and receiving redemptions of foreign securities.
Another important discussion topic was the restoration of investor confidence in the securities market. In this context, the meeting participants discussed the issues related to the improvement of communication between market participants and clients in the crisis environment, warning clients about potential risks, and the completeness of disclosures.