UniCredit Bank participated in a meeting of the Depository Council of the National Finance Association (NFA), the largest self-regulating organisation joining Russian custodians. The meeting was well attended by representatives from various leading banks.
The agenda covered, in particular, the results of NFA endeavours in the previous year and the main directions of plans for 2019 that would be carried out by NFA in cooperation with local securities market participants and the Bank of Russia.
The most important and relevant topics raised during the meeting were as follows:
1. Removal of tax agent functions from custodians due to the complexity of tax calculation
As an alternative it was proposed to introduce a verification process for tax rates to be further applied by custodians. It was suggested that the verification to be done by the Russian tax authorities in order to avoid possible tax miscalculation. Currently the correct application of tax rates by custodians is monitored by the Russian Tax Audit on a selective basis.
2. Change of the account naming convention at CSD level
It was proposed that the names of the underlying investors of Nominee Holders (NH) alongside with the name of the NH be reflected in the account details with CSD so that the underlying investors would be evident in the unlikely event of custodian bankruptcy.
3. Provisions clarifying the frequency, basis and rationale for disclosure requirements by issuers are now under an elaboration process by the legislative authorities
Issuers will have the right to send the mandatory disclosure request (non-related to corporate actions) once a quarter for reporting purposes. All other disclosure requests will be accepted and treated at custodians’ discretion and at a charge.
4. Standardisation of the set of documents to be provided for participation in corporate events (market offers, exchange offers)
Currently such corporate events are not part of the electronic document interchange process cascaded from the local custodian via NSD to third party agents being mostly legal entities affiliated with the issuers.
5. Right of subrogation by the client to their custodian
The financial and legal consequences for the custodians will be taken into consideration in cases where the false actions of third parties (registrars, sub-custodians) are under review.
Participation in this kind of meetings and working groups allows UniCredit Bank to be closely involved in market discussions about the market trends and further evolution of the infrastructure, - and to sharing our international experience, best practices and practical knowledge in working with our large international clients.
Head of Global Securities Services Russia