1). Federal Act 379 of 21.12.2013 contains innovative amendments that were drafted with the direct involvement of the MIFC Taskforce.The Securities Market Act amendments have introduced two new types of entities – specialized financial companies and specialized project finance companies (the Russian analog of SPV). This change enables us to launch the mechanism of securitization.

Financial companies can buy monetary claims (including those to arise in the future) contained in credit and loan agreements, or any related assets – and issue bonds backed by the pledged claims.

A new instrument has arrived on the market, the individual investment account – another incentive for long-term private investment in the stock market. The account is designed for separated safekeeping of privately-owned cash and securities with a broker or asset manager. A private individual is entitled to one account only and a limit of RUB 400k per annum. This scheme provides income tax deductions.

2). Several Civil Code (Part 2) amendments have also been enacted:

1. Escrow accounts

The Russian Civil Code now features articles on escrow account regulation. In accordance with a three-party escrow agreement, Agent opens an escrow account for safekeeping and blocking cash received from account owner (depositor) to transfer the amount to the counterparty (beneficiary) when the conditions outlined in the bank-depositor-beneficiary agreement arise.

The adopted version is largely different from the version of escrow used in global business practice. The account cannot be used for processing securities or other assets.

2. Nominee account agreements

Nominee accounts are used for operations with cash owned by another party – the beneficiary. Incoming cash belongs to beneficiary, including deposits made by account owner. A nominee account may be opened for operations with cash owned by multiple beneficiaries.

The account may be used to separate cash coming from intermediary contracts. This will help protect the interests of the beneficiary in case of enforced collection from the agent’s account or bankruptcy of the agent.

Enforcement Law has also been amended to include the procedure of recovering sums from nominee bank accounts.

Several Notary Act amendments have also been enacted:

Integrated Notary Data System. The notary law has been amended by a new section on Integrated Notary Data System, that will unify notary registrars, inheritance cases and pledged movable notifications.

The new notary law also stipulates equality of e-docs and printed documents.

The new pledge law features revised foreclosure rules, expanded lists of pledge subjects and types. The previous Pledge Act 2872-1 of 29.05.1992 has been repealed.

Also in force since July 1 is Federal Act 210 of 23.07.2013 on Amendments to the Securities Market Act. These amendments are designed to protect the rights and interests of bondholders. Amendments cover companies that have or are planning to issue bonds. The new norms are also geared to boost the number of bond issues and their investor appeal.

Three major changes have been introduced:

a) early redemption procedure, including the option for early redemption on demand regardless of the prospectus, in the event of material breach of bond-related obligations.

b) the institution of bondholder representatives with clear requirements, functions, as well as election and replacement procedures.

c) General Bondholder Meetings with detailed procedure.

Corporate and contract law, Project Group №2