If an ADR owner fails to disclose his identity to the company within one month of the dividends distribution, the company’s obligation to pay dividends is terminated and their amount is relocated to undistributed profits.

The amendments are part of the accompanying bill to the Central Depositary Act.

The norm was developed simultaneously with the amendments to the Securities Market Act, introducing three new accounts for Russian depositaries: foreign nominee depo, foreign custodian depo and depositary programs depo.

Head of the Russian National Association of Securities Market Participants (NAUFOR) Alexey Timofeev (who took part in the draft) says that today ADR issuer banks are registered as underlying share owners in registrars and Russian depositaries. Being owners these issuer banks receive dividends which are later redistributed to ADR owners.

According to him, the new depository programmes account is a special means of registering title to securities for ADR issuers, without acknowledgment as beneficial owners. ‘Thus, there is a logical question – who is responsible for exercising rights depositary receipts? The draft law envisions the compilation of a depositary receipts owners list’, said Alexey Timofeev.

Besides, the draft law implies that the issuer bank, owner of depository receipts, can vote at the shareholder meeting only with the shares whose owners have been disclosed.

Alexey Timofeev said, that the second new account of the foreign custodian also does not make the account holder an owner of the shares. However, the owner can exercise all securities rights if this is allowed by his own country’s legislation. ‘This type of account is suitable for trustees, who exercise rights for other people according to the English law’, he said.

FFMS Deputy Head Alexander Sinenko says the implementation of this norm is a global trend. ‘It is necessary to stimulate the national market and provide the choice. If you would like to receive dividends and exercise rights, then provide your identification, please’, he said. If you prefer to stay secret, be happy with share value growth’, he said.

Alexander Sinenko added that it’s not a Russian novelty, but a worldwide trend. ‘Everyone wants to be transparent, to know the owner. Moreover, we are talking about control over corporations with assets in Russia’, he underlined.

Project Group №1, Alexander Sinenko, Alexey Timofeev