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Major Issuers Support Gradual Switch to E-Communication with Shareholders

12.02.2015 12:00 / Interfax

Issuers with a large amount of minority shareholders support gradual switch to e-communications, while major foreign investors welcome the opening of new issuer interaction channels through the settlement system.

Issuers generally agree that e-workflow through National Settlement Depositary (NSD) will benefit them, cut costs, and provide an equal platform for shareholders in company management, however, they ask for a grace period to use both paper and e-distribution.

Access to GSM material in electronic form is beneficial for major investors, says Executive Director at Professional Investors Association Alexander Shevchuk.

“60% of our members are global investment funds. One of the services we provide to foreign funds is GSM voting recommendations, and now we can really speed up the process of drafting these recommendations. Everyone has felt the positive impact”, said Shevchuk.

According to him, several depositaries have announced to investors the launch of e-voting this GSM season.

“Recent years have seen the forming of a clear trend among investors to take more interest in corporate actions. Improved voting infrastructure boosts the competitiveness of our market”, says the Association head.

E-voting enables shareholders to vote in absentia by routing their instruction through the depositary to the issuer, or by voting on the website, taking part in the GSM by watching the video feed. All issuer information and documents is emailed to shareholders through the registrars and depositaries.

Phase 1 of the reform in August 2014 launched e-voting and e-distribution of GSM materials. Going forward, everything related to corporate actions, issuer’s documents will be distributed to shareholders via registrars and depositaries. The necessary amendments to the Joint-Stock Companies Act are due to be passed in May-June.

“We think it is only fair that the advantages of financial infrastructure – the technology and e-workflow should be available in corporate actions”, Deputy CEO of National Settlement Depositary Maria Krasnova told Interfax, highlighting the considerable reduction of issuers’ postage expenses.

“This reform is really special in that it simplifies the execution of all corporate actions participants’ lawful interests in accordance with best global practice”, said Krasnova, adding that the reform will elevate the Russian financial market to a new technological level and allow it to benefit from attracting more investors, cutting risks and expenses for market participants.

Shareholders get to choose any GSM participation method they prefer: in person with paper bulletin voting; sending instructions through depositary; or e-voting.

“The lion’s share of the mailing budget is distribution of documents to private individuals, who are clearly not ready yet for switching to e-communication”, says Head of Corporate Actions at Evraz Group Anastasia Mazurkova.

Investment Projects Director at Lukoil Andrey Gaidamaka says that over the past ten years the company has been trying to train over 60 thousand shareholders, including employees and pensioners, to use their online accounts. “Despite this, for the past 10 years we have had to constantly meet our shareholders where they live, arrange small shareholder meetings and explain what is going on and how dividends are paid”, said Gaidamaka. He thinks shareholders need help in switching to new communication methods.

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