A variety of warrants are depositary receipts.

Depository receipt is a negotiable secondary security issued by a global depository bank for shares of a foreign issuer.

They first appeared in the USA, where in 1927 the Morgan Guaranty Bank created a fundamentally new instrument that allowed foreign investors to purchase shares of foreign issuers on the domestic market - American depositary receipts (ADR – American Depositary Receipts). Later, another type of these instruments appeared - global depositary receipts (GDR – Global Depositary Receipts). The difference between them is only in the geography of their distribution. ADRs are freely traded on the US stock market, while GDRs are traded in other countries.

In 2007, Russian depositary receipts (RDRs) appeared on the Russian stock market.

Depository receipts allow foreign investors to purchase securities of foreign issuers.

American Depositary Receipt (ADR) – a receipt for foreign shares deposited in a US bank. Transactions with ADRs are carried out in lieu of transactions with securities held by a bank or custodian. ADR holders generally retain the rights of shareholders of the securities in the country of issue. Its essence is that the bank stores the corresponding shares abroad in one of its branches, and the receipts are issued and traded on the American market.

Interest in ADRs is growing because... they are attractive to both investors and issuers.

For the investor they provide certain guarantees due to the fact that:

have the same liquidity as the securities themselves;

usually quoted in US dollars;

help institutional investors overcome legal restrictions when purchasing and other transactions with securities of foreign issuers;

provide the opportunity to buy them instead of shares and use them to make a profit due to the difference in quotes on the American market and other markets, as well as to participate in the capital of foreign companies;

make it easier not only to sell securities of foreign issuers, but also to receive dividends to American investors.

To the benefits for issuers applies:

the entry of issuing companies into the foreign market, which increases its prestige and trust from investors;

the liquidity of shares increases;

legal restrictions on direct ownership of shares are overcome;

the composition of potential investors is expanding;

the fair market value of the shares is formed;

attracting capital from foreign investors.

ADRs can be sponsored or unsponsored. If the receipts are issued at the request of the issuer, then they are considered sponsored, and the issuer pays the costs of the sponsored program. Banks may create unsponsored receipts at the request of investors; holders of such receipts bear all costs, including fees for depositing and withdrawing securities from the depository, converting dividends into dollars and other services. Unsponsored programs are now considered obsolete and are rarely released.

One of the main reasons for the appearance of depository receipts in the Russian Federation was certain difficulties in terms of speculation by foreign portfolio investors, associated with the lack of clear guarantees in the country when re-registering ownership of acquired shares. In the American market, for example, receipts issued for the shares of the GUM Trading House, NK LUKoil, Inkombank, etc. were circulated. The issue of ADRs for the shares of these and other institutions, as well as their placement, were carried out by such well-known companies, which were audited according to international standards corporations such as RAO UES of Russia, OAO Rostelecom, OAO Mosenergo, OAO Surgutneftegaz. ADRs issued by Russian corporations allowed their owners to have all the rights of shareholders, incl. receiving dividends, as well as working in the American market subject to certain objective restrictions.

Global Depositary Receipt Global Depositary Receipt ), GDR (English GDR) - a depositary receipt, which, as a rule, circulates in several countries, usually European countries. A GDR is a certificate issued by a depositary bank certifying the right of its owner to benefit from the securities of a foreign issuer deposited with that bank. One GDR may be equivalent to one share, part of a share, or several shares of a foreign issuing company. This is a fairly young instrument of the securities market, as it appeared on the US stock market in 1990. GDRs are issued similarly to ADRs with some additional requirements (for example, the requirement to submit reports to the regulatory authorities of the countries where they will be issued). The cost of their placement is somewhat more expensive; there is no obvious advantage. Therefore, GDRs are issued less frequently than ADRs.

Russian Depository Receipt (RDR) - this, in accordance with the Federal Law “On the Securities Market”, is a registered issue-grade security that has no par value, certifying ownership of a certain number of shares or bonds of a foreign issuer and securing the right of its owner to demand from the RDR issuer to receive in return for the RDR the corresponding number of represented securities and provision of services related to the exercise by the owner of the RDR of the rights secured by the represented securities.

The first RDRs to begin trading were December 24, 2010. and listed on the MICEX and RTS stock exchanges on December 16, 2010, are RDRs for ordinary shares of the united company Rusal, which is registered on the island of Jersey (UK jurisdiction), traded on the Hong Kong Stock Exchange.

The issuer of Russian depositary receipts is a depositary that meets the requirements for the amount of equity capital (own funds) and has been carrying out depository activities for at least three years.

Russian depositary receipts of one issue can certify ownership of the represented securities of only one foreign issuer and only one type (category, type).

The procedure for issuing Russian depositary receipts includes the following stages:

1) approval of the decision on the issue of Russian depositary receipts by the authorized body of their issuer - the depository;

2) state registration of the issue of Russian depositary receipts;

3) placement of Russian depositary receipts.

The circulation of Russian depositary receipts can be carried out after the state registration of their issue, and the placement and circulation of Russian depositary receipts of an additional issue - after registration of changes to the decision on the issue of Russian depositary receipts.

The decision to issue Russian depositary receipts must indicate:

1) the full name of the issuer of Russian depositary receipts, its location and postal address;

2) the date of approval of the decision on the issue of Russian depositary receipts and the name of the authorized body of the issuer of Russian depositary receipts that approved the specified decision;

3) name and location of the issuer of the securities being represented;

5) rights secured by the represented securities;

6) the number of securities represented by one Russian depositary receipt;

7) conditions for placement of Russian depositary receipts;

8) the maximum number of Russian depositary receipts of the issue that can be in circulation at the same time;

9) the rights of the owners of Russian depositary receipts, as well as the procedure for the exercise (realization) by the owners of Russian depositary receipts of the rights secured by the represented securities;

10) the obligation of the depository to provide, at the request of the owner of the Russian depositary receipt, the appropriate number of securities being represented;

11) the procedure for the issuance by owners of Russian depositary receipts of instructions to the depository on the voting procedure for such shares and the obligation of the depository to ensure the exercise of voting rights on shares of a foreign issuer;

12) the obligation of the depositary to disclose information in accordance with federal legislation;

13) the obligation of the depository to ensure that the number of securities presented corresponds to the number of Russian depositary receipts in circulation;

14) the obligation of the depositary to provide services for the exercise of rights under the securities represented;

15) the deadline for making payments due to the owners of Russian depositary receipts for the securities represented;

16) the maximum amount of funds retained by the issuer of Russian depositary receipts in connection with payments;

17) the procedure for storing, recording and transferring rights to Russian depositary receipts;

18) the procedure and deadlines for compiling a list of owners of Russian depositary receipts;

19) the possibility and procedure for splitting Russian depositary receipts;

21) other information.

State registration of the issue of Russian depositary receipts and registration of the prospectus for Russian depositary receipts are carried out by the federal executive body for the securities market.

The issuer of Russian depositary receipts discloses information about itself, as well as about the issuer of the securities represented, in the form of a quarterly report of the issuer of equity securities (quarterly report) and reports of material facts (events, actions) affecting the financial and economic activities of the issuer of equity securities.

The depositary is obliged to submit quarterly to the federal executive body for the securities market a certificate on the number of Russian depositary receipts in circulation and the number of represented securities held in the account of the issuer of Russian depositary receipts.

Payments to the owners of Russian depositary receipts are made by the issuer of Russian depositary receipts in the currency of the Russian Federation within a period not exceeding five days from the date the depositary receives the corresponding payments from the issuer of the securities represented.

If the owner of a Russian depositary receipt has received from the depositary the corresponding number of securities represented, such a Russian depositary receipt is redeemed.

Greetings to future investors! We continue our acquaintance with investment instruments and today, following, we will consider what a depositary receipt is.

Let's start traditionally with the official definition. So…

A depositary receipt is a document confirming the fact of placement of securities in a custodian bank (depository bank) located in the country of the issuer of the shares and granting the owner of the shares the right to dispose of them and receive economic benefits from their growth.

Difficult, right? Let’s simplify the definition and simply say that a depositary receipt is a kind of tool that allows traders and investors to work with shares of foreign companies without any obstacles.

If we consider this as an example, the mechanism of action of a depositary receipt will look something like this: let’s say you are a trader who has a trading account with an American broker. In this case, you want to purchase a stake in a company located, say, in Japan. It is not always possible to make a purchase transaction directly. Often you have to carry out a purchase according to the following procedure - you leave an application to your broker, who, through personal channels, forwards it to a Japanese broker so that he can purchase the shares you are interested in and transfer them to the custodian bank for safekeeping.

In turn, this bank transfers all these shares to the account of a US depository bank, which issues depositary receipts. They can be of different denominations. For example, one such receipt can be equal to 1000 shares. Receipts are forwarded to the American broker, who closes your application.

So, if you ordered 5,000 shares, your account will have 5 receipts, which you are free to dispose of as you wish.

Well, has it become a little clearer? For clarity, I will attach a diagram of how this happens:

Don't be alarmed by the fact that the process described is too long and complicated. You, as a trader or investor, should not be interested in this at all, because... All these procedures have long been brought to automaticity and are carried out by specially trained people. Therefore, we are often not very interested in how, where and why the issuer places shares, because in the end they will still go to our account.

By the way, often depositary receipts are not reached at all, because if you have expressed a desire to purchase shares of a foreign company, your broker will easily find someone who just wants to sell them, and everything will be done without any receipts.

Depository receipts can be divided into three large groups:

Global Depositary Receipts (GDR – Global Depositary Receipt)

They are produced in developed world countries (mostly European). The largest depositary bank working with them is Deutsche Bank.

American Depositary Receipts (ADR – American Depositary Receipt)

They are written by the largest American banks for shares of world-famous corporations. Almost all ADRs issued are accounted for by three banks: Citigroup, Morgan Stanley and Bank of New-York.

Russian Depository Receipts (RDR)

They appeared relatively recently, in 2007. According to their official definition, RDR is a registered security that certifies the investor’s right to own shares of foreign companies, but does not have a par value.

Finally, let’s consider what benefits we, investors, can actually get from depository receipts.

Firstly, new trading instruments and the right to buy shares of foreign companies. If the stock market were limited by state borders, working with it would be extremely inconvenient.

Secondly, depository receipts, despite the long system of their operation, significantly simplify transactions with foreign shares, compared to their direct purchase.

Third, they are as liquid as ordinary shares and provide the same rights (receiving dividends, voting rights, etc.), and I repeat, it is easier to work with them.

As for the shortcomings, in fact, there are none. Trading risks do not change, rights are not curtailed.

So, expand the boundaries of your activities, replenish your investment portfolio, and a depositary receipt will help you with this. Until next time.

Best regards, Nikita Mikhailov

Posted on the website 03/05/2011

Russian depositary receipts (RDR) are a new instrument on the Russian stock market. On December 24, 2010, trading in depositary receipts of Sberbank of Russia OJSC, certifying the rights to ordinary registered shares of United Company RUSAL Plc, began on two Russian exchanges - RTS and MICEX. Let us consider the essence and features of accounting for transactions with depository receipts.

The processes of globalization and integration of financial markets contribute to the emergence of new financial instruments that allow the movement of capital even with significant differences in national legal systems. Depository receipts are a common tool in world practice that allows you to organize the circulation of securities outside the jurisdiction where they were issued.

They started talking about the need for such a financial instrument in Russia several years ago. The starting point in the creation of Russian depository receipts should be considered June 2006, when the “Strategy for the development of the financial market of the Russian Federation for 2006-2008” was approved by order of the Government of the Russian Federation dated 01.06.2006 No. 793-r. The strategy stipulated that in order to stimulate the concentration of transactions with financial assets of other countries on Russian exchanges, it is necessary to create a legal framework for the issuance and circulation of Russian depositary receipts for these assets. In fact, this was the first step towards opening the Russian securities market to foreign issuers.

Features and prospects of Russian depositary receipts

Let's take a closer look at what depositary receipts are in general and Russian depository receipts in particular.

Simply put, depository receipts can be considered as securities representing a certain number of underlying shares (or bonds) and certifying the rights of their owner in relation to the underlying asset (shares, bonds) of a foreign issuer. Trading and settlement of depositary receipts takes place outside the country in which the issuer of the underlying shares (or bonds) is registered. Issuers of depository receipts are depositories operating on the national stock market. They are also transferred the rights to the corresponding number of securities issued abroad. Custodians of the underlying assets are depositories in foreign countries.

Basic terms

When describing the procedure for issuing and circulating Russian depositary receipts, the following terminology will be used:

— RDR issuer is a depository created in accordance with the legislation of the Russian Federation, meeting the requirements for the amount of equity capital (own funds) and the period of activity established by the regulatory legal acts of the Federal Financial Markets Service of Russia;

— the issuer of the securities being represented is a legal entity created in accordance with foreign law;

- RDR registrar - RDR issuer-depository or registrar - a specialized organization carrying out activities to maintain the register on the basis of the issuer’s instructions;

— custodian — a foreign registrar/depository that records rights to the securities represented and is included in the list approved by the federal executive body for the securities market — the Federal Financial Markets Service of Russia;

— Russian Stock Exchange is a stock exchange on the territory of the Russian Federation that admits RDRs to trading with/without going through the listing procedure.

Russian depositary receipts are a new instrument of the Russian stock market, the main essence of which is the opportunity for foreign issuers to enter the Russian market through the implementation of depository programs for shares and (or) bonds.

The infrastructure for issuing RDRs can be represented as the following Scheme 1:

Scheme. RDR 2 release infrastructure

Regulatory regulation of the rights of RDR owners

The regulatory legal framework for Russian depositary receipts consists of the following documents:

— Federal Law No. 39-FZ of April 22, 1996 “On the Securities Market” (introduces the concept and establishes general requirements for the issuance of Russian depositary receipts) (hereinafter referred to as the Law on the Securities Market);

— standards for issuing securities and registering securities prospectuses, approved by Order of the Federal Financial Markets Service of Russia dated January 25, 2007 No. 07-4/pz-n (establishes the procedure for issuing and state registration of the issue of Russian depositary receipts, requirements for documents drawn up during the issue);

— regulations on the disclosure of information by issuers of equity securities, approved by Order of the Federal Financial Markets Service of Russia dated October 10, 2006 No. 06-117/pz-n (regulates the composition, procedure and timing of mandatory disclosure of information by issuers of Russian depositary receipts);

— regulations on activities for organizing trade in the securities market, approved by Order of the Federal Financial Markets Service of Russia dated October 09, 2007 No. 07-102/pz-n (regulates the procedure for public circulation of Russian depositary receipts at trading on stock exchanges (securities listing);

— a list of organizations in which Russian depositories can open accounts to record rights to foreign securities for issuing Russian depositary receipts, approved by Order of the Federal Financial Markets Service of Russia dated April 27, 2007 No. 07-52/pz-n;

— a list of stock exchanges, the inclusion of foreign securities in the quotation lists of which is a mandatory condition for the issue of Russian depositary receipts in the event that the issuer of foreign securities does not assume obligations to the owners of Russian depositary receipts (approved by Order of the Federal Financial Markets Service of Russia dated April 27, 2007 No. 07-51/pz-n);

— standards for the adequacy of own funds of professional participants in the securities market, as well as management companies of mutual investment funds and non-state pension funds, approved by Order of the Federal Financial Markets Service of Russia dated April 24, 2007 No. 07-50/pz-n.

REFERENCE

The most well-known types of depositary receipts are American Depositary Receipts (ADR), European Depository Receipts (EDR) and Global Depositary Receipts (GDR). ADRs are issued for circulation in the US markets, EDRs are issued only for circulation in the markets of Western Europe (mainly London and Luxembourg), GDRs can be circulated both in European markets and in the USA.

Global depositary receipts are placed outside the country of the issuing company in the markets of two or more countries.

The definition of a Russian depository receipt was introduced by Art. 2 of the Law on the Securities Market.

A Russian depositary receipt (RDR) is a registered book-entry security that:

- has no nominal value;

— certifies ownership of a certain number of shares or bonds of a foreign issuer (represented securities);

— secures the right of its owner to demand from the RDR issuer to receive in exchange for the RDR the appropriate number of represented securities and to provide services related to the exercise by the owner of the RDR of the rights secured by the represented securities.

So, RDR is a security whose underlying asset is the securities of a foreign issuer. At the same time, RDRs of one issue can certify the ownership of the represented securities of only one foreign issuer and only one type (category, type).

The rights secured by the represented securities, including those related to the receipt of income on them, are exercised in favor of the owners of RDRs who are such on the date of compilation of the list of owners of the represented securities and who have the corresponding rights, including to receive income from the securities and other due payments to owners. Payments to RDR holders are made by the RDR issuer in the currency of the Russian Federation, unless otherwise established by the decision on the issue of RDR. The period for fulfilling obligations related to making these payments cannot exceed five days from the date the depository receives the corresponding payments from the issuer of the securities being represented.

To protect investors from the risk of bankruptcy of the RDR issuer, the Law on the Securities Market stipulates that in case of provision of services to the depositor related to the receipt of income on securities and other payments due to the owners, the funds of the depositors must be in a separate bank account opened by the depository in a credit institution (special depository account).

Features of the circulation of RDR

RDR has a number of features compared to other types of securities existing in Russia:

— a report on the results of the RDR issuance is not registered;

— there is no requirement to complete the placement of RDRs within one year from the date of state registration of their issue;

— circulation of RDRs can be carried out after state registration of their issue;

— RDR is redeemed when the securities certified by it are issued to the owner of the RDR;

— with the redemption of RDRs, the maximum number of depository receipts that can simultaneously be in circulation in accordance with the decision to issue RDRs does not change;

- the RDR register can be maintained by their issuer - the Russian depositary, regardless of the number of RDR owners.

The issuer of RDRs can only be a depository:

— created in accordance with the legislation of the Russian Federation;

— meeting the requirements for the amount of equity capital (at least 200 million rubles of equity capital) established by the federal executive body for the securities market;

— carrying out depository activities for at least three years.

There are two types of RDR release programs - “Sponsored” and “Unsponsored”.

When issuing sponsored securities, an agreement is concluded between the issuer of the underlying asset and the Russian depository - the issuer of RDRs, according to which the issuer of the securities being represented assumes obligations to the owners of the RDRs. In this case, the RDR also certifies the right of its owner to demand the proper performance of these duties.

When issuing unsponsored securities, the issuer of the underlying securities does not assume obligations to the holders of RDRs. In this case, the issue of RDRs is possible only if the securities represented are included in the quotation lists of foreign stock exchanges, the list of which is approved by the federal executive body.

If the issuer of the represented securities (foreign issuer) assumes obligations to the owners of RDRs, then the depositary receipt also certifies the right of its owner to demand the proper fulfillment of these obligations.

The obligations of the issuer of the represented securities to the owners of the RDR must be provided for in the agreement between him and the issuer of the RDR. The necessary terms of the contract are:

— an indication of the rights secured by the securities being represented;

— the obligation of the depository to ensure that the number of RDRs in circulation corresponds to the number of securities represented, the rights to which are recorded in an account opened to it as a person acting in the interests of other persons;

— an indication that the securities presented are issued for the placement of RDRs and (or) are in circulation;

— the procedure for issuing (sending) instructions by the owners of RDRs to the depository on the procedure for voting on shares and the obligation of the depository to ensure the exercise of the voting right on shares of a foreign issuer (represented securities) only in accordance with the instructions of the owners of the RDRs, as well as to present the voting results to the owners of the RDRs;

— the obligation of the issuer of the securities being represented to provide information in Russian in a volume and within a time frame that provides the depository with the opportunity to disclose it in the volume, manner and within the time limits provided for by the legislation of the Russian Federation;

— the obligation of the depositary to disclose information received from the issuer of the securities being represented no later than the day following the day of its receipt;

— an agreement on the application of the laws of the Russian Federation to relations arising from this agreement;

— an agreement on the consideration of disputes arising as a result of non-fulfillment or improper fulfillment of obligations under the contract in the territory of the Russian Federation by courts, the decisions of which can be recognized in the territory of the issuer’s country in accordance with an international treaty of the Russian Federation;

— provision on the liability of the depository and the issuer of the represented securities for non-fulfillment or improper fulfillment of their obligations under the agreement to the owners of RDRs;

— a provision that the contract cannot be terminated without the consent of the owners of the RDR.

From the date following the date of state registration of the RDR issue, the issuer becomes obligated to disclose information. There are differences between sponsored and unsponsored RDRs regarding the disclosure of information by the issuer of the RDRs. When issuing sponsored RDRs, the issuer is required to disclose information received from the issuer of the underlying securities. When issuing unsponsored securities, the issuer of RDRs is required to disclose information that is disclosed in accordance with foreign law by the issuer of the underlying securities on a foreign stock exchange to foreign investors.

The issuer of RDRs is required to disclose the financial statements of the issuer of the securities represented, prepared in accordance with IFRS or US GAAP. If an RDR prospectus is registered, the issuer is required to disclose information about the issuer of the underlying securities and the underlying securities in the form of a quarterly report and statements of material facts.

The issue of RDRs, in contrast to the standard issue of securities by Russian issuers, consisting of five stages, includes only three:

— approval of the decision to issue Russian depositary receipts by the authorized body of their issuer-depository;

— state registration of RDR issue;

— direct placement of the RDR.

REFERENCE

Depository receipts (DRs) were invented in 1927 by the financial company Morgan Guaranty and were intended to simplify the public offering of securities of the famous British supermarket Selfridge on the American market. The financial crisis of 1929 and the Great Depression slowed down the development of the DR market for a long time.

A real boom in the early 1990s. was associated with the massive entry into the American and European markets of issuing companies from Southeast Asian countries, Australia and a number of Latin American countries.

At the end of 2008, the volume of DR trading in the world exceeded $4.4 trillion, which became a historical record. At the end of 2009, this volume decreased to $2.7 trillion, according to the annual report of the Bank of New York Mellon (BoNY Mellon), one of the world's main depositories. According to the same source, in total, $32 billion was raised last year through the issuance of depository receipts, which is 122% higher than the volume recorded in 2008 — $14.4 billion.

Issuers from countries with developing economies (emerging markets) continue to occupy a dominant position in the global markets of American and global depositary receipts for shares, BoNY Mellon analysts report. The leader in the volume of transactions with DR on shares in the region of Eastern Europe, the Middle East and Africa (EEMEA) at the end of 2009 was OJSC Gazprom (about $66 billion). The top five in terms of trading activity also included Russian OAO LUKOIL and OAO Rosneft.

Thus, the issuance of RDRs is carried out without making a decision on their placement, submitting to the FSFM of Russia a report on the results of issuing the RDR and its state registration, and also without submitting to the FSFM of Russia a notification on the results of issuing the RDR.

The placement and circulation of RDRs can be carried out after state registration of their issue, and the placement and circulation of RDRs of an additional issue - after registration of changes made to the decision to issue the RDR. Thus, state registration of additional RDR issues does not occur, and an increase in the maximum number of RDR issues that can be in circulation at the same time is carried out by amending the decision on the issue of RDR. Moreover, the placement of RDRs can be carried out through both open and closed subscription.

An important advantage of issuing RDRs over issuing other securities is that the issuer is not obligated to complete the placement of securities no later than one year from the date of state registration of their issue.

There are conditions when the issuer of RDRs is obliged to suspend the placement of RDRs. This happens in the case:

— crushing of RDR;

— splitting or consolidation of the securities represented;

— changes in the scope and (or) procedure for exercising the rights secured by the securities represented.

The placement of the RDR is resumed from the moment the registered changes to the decision to issue the RDR come into force.

Market development forecast and potential RDR issuers

Now we can definitely say that the way for foreign issuers to enter the Russian securities market is open by issuing RDRs. The legal basis for this has been created at the legislative level; the first RDRs have begun circulating on Russian exchanges. What's next? Who is interested in listing their securities on the Russian stock market, who are they, potential issuers?

Experts primarily name the CIS countries, where the capital market is less developed, where companies are interested in attracting capital from the Russian stock market at a lower cost (compared to the American and European markets). According to experts, companies from countries such as Ukraine, Kazakhstan, Belarus, etc. may prefer the Russian securities market.

The second group includes companies from non-CIS countries that have strategic plans to enter the Russian market, as well as companies that have placed their shares not in Russia, but own assets in Russia, and therefore count on the interest of Russian investors. This also partially includes companies that have placed their shares on the markets of England (LSE), Germany (Deutsche Borse), etc.

In recent years, a third group of companies—potential RDR issuers—has emerged. These are holdings registered in offshore zones, which conducted an IPO (Initial Public Offering - an initial public offering of company shares for sale to a wide range of people) abroad and owning 75-100% of all their assets in Russia.

Accounting for transactions with depositary receipts

Currently, accounting for transactions with depository receipts is not established by the Bank of Russia regulations. In this regard, the following options for accounting for acquired DR are possible.

Option 1. Due to the fact that depository receipts are issued as an independent type of equity securities, and also have their own properties and registration number (ISIN), they are accounted for on the balance sheet as independent securities. Thus, depositary receipts are subject to accounting, depending on their type and qualifications, in accounts 50104-50110, 50205-50211, 50305-50311 “Investments in debt obligations” and in accounts 50605-50608, 50705-50708 “Investments in equity securities” .

Option 2. Due to the fact that DR certify the right to a certain number of shares or bonds, and also allow the exercise of part of the rights of the owner of these shares or bonds (voting, income/dividends), on the balance sheet they are accounted for as investments in shares or bonds (but with your registration number or ISIN). Thus, depositary receipts are subject to accounting in the same accounts as in option 1, only as shares or bonds directly.

Option 2 is more convenient due to the fact that, firstly, the issue of the currency of DR accounting is immediately removed (remember that DR has no face value). Secondly, the issue of determining the current fair value of DR is easier to resolve, since it is automatically equated to the price of the underlying shares or bonds. Thirdly, it is clearer to fill out reporting forms (for example, form 0409116 “Information on securities acquired by a credit institution”). However, from an economic point of view, DRs are still not stocks and bonds, but are derivative financial instruments; in addition, the same reporting forms indicate the form of paper (in particular, a “depository receipt”), foreign DRs carry currency risk and etc. Taking into account the above, option 1 seems more correct, while the bank’s accounting policy should stipulate that the DR is accounted for in the currency of the country in which the receipt was issued, and establish a procedure for determining the current (fair) value (if the DR is accounted for in accounts for recording valuable assets) securities measured at fair value through profit or loss).

Even more confusing is the question of the accounting procedure for issued RDRs. In the chart of accounts in Sect. 5 does not provide accounts for accounting for issued DRs, and therefore, apparently, it is advisable to account for issued DRs on separate personal accounts of balance sheet account 47422 “Liabilities for other operations” in the context of issues (registration numbers) of DRs.

The chosen accounting option must be fixed in the bank's accounting policy.

The issue of RDR is reflected in accounting by the following entries.

Purchase by the depositary bank of shares or bonds underlying the RDR:

Dt 501-503 “Investments in debt securities”, 506, 507 “Investments in equity securities”

CT account for cash accounting - for the amount of purchased securities.

Transfer of shares (bonds) to the depository account of the issuing bank of the DR:

Dt 98010 “Securities stored in the leading depository (NOSTRO depot basic)”

Kt 98050 “Securities owned by the depositary” - for the number of shares (bonds) received.

RDR emission:

Kt 47422 “Liabilities for other operations”, “Issued RDR” - for the cost of issued RDR.

Receiving payment for issuing sponsored RDRs:

Dt account for cash accounting

Kt 70601 (13201) “Income from transactions with issued securities” - in the amount of the fee for issuing RDRs.

During RDR servicing:

Receiving interest, coupons, dividends on securities underlying the RDR:

Dt account for cash accounting

Kt 47422 “Liabilities for other transactions”, “Calculations for interest, coupons, dividends” - for the amount of interest, coupons, dividends.

Transfer of interest, coupons, dividends on securities underlying the RDR:

Dt 47422 “Liabilities for other operations”, “Calculations for interest, coupons, dividends”

CT accounts for cash accounting, current accounts - for the amount of interest, coupons, dividends.

Issued RDRs are redeemed by issuing instead the shares or bonds underlying them:

Dt 47422 “Liabilities for other operations”, “Issued RDR”

Kt 501-503 “Investments in debt securities”, 506, 507 “Investments in equity securities”.

The operation is accompanied by the write-off of issued shares or bonds from the depository account.

Accounting for investments in RDRs is carried out in the manner established for the acquisition of securities by Appendix 11 to Bank of Russia Regulation No. 302-P dated March 26, 2007, and in accordance with the above principles.

Accounting for investments in RDR:

Dt 50605, 50705 “Investments in equity securities of credit institutions” (option 1)

Dt 50608, 50708 “Investments in equity securities of other non-residents” (option 2)

CT account for cash accounting - for the amount of investments in RDR.

The nominal value of the investment is rubles (option 1) or foreign currency (option 2).

Since the accounting procedure for transactions with Russian depositary receipts is not regulated, before carrying out such transactions, banks should make appropriate requests to the local territorial governing bodies of the Bank of Russia and national banks.

1 - Issue of Russian depositary receipts (RDR). A short guide for issuing companies. OJSC "RTS Stock Exchange".

2 - Ibid.

L.M. Urskova, JSC Bank Russian Financial Corporation, Head of Financial and Investment Consulting Department
V.B. Potekhin, Russian Development Bank OJSC, chief accountant, chairman of the committee on taxation, accounting and reporting of the Association of Russian Banks

Russia, as a large developing country, showing high rates of economic growth in the pre-crisis period and identified by world economists as a special group of rapidly developing countries, on the path of integration into the world global economy, strives to take one of the leading places among developing countries on a global scale. To strengthen its position in the global financial market, Russia needs to improve its financial system, create favorable conditions for the development of the national stock market, attract foreign participants to the Russian stock market, and expand the range of traded financial instruments. Foreign issuers can use Russian Depository Receipts (RDRs) to enter the Russian securities market: Their issue is carried out on securities of a foreign issuer through state registration in the Federal Service for Financial Markets (FSFM) of Russia of the issue of RDRs of the issuer - a depositary created in accordance with the law of the Russian Federation, meeting the requirements for the amount of equity capital (own funds) established by the regulatory legal acts of the Federal Financial Markets Service of Russia and carrying out depository activities for at least three years.

Characteristics of DDR

A Russian Depositary Receipt (RDR) is a registered book-entry security that:

* has no nominal value;

* certifies ownership of a certain number of shares or bonds of a foreign issuer (represented securities);

* secures the right of its owner to demand from the RDR issuer to receive in exchange for the RDR the appropriate number of represented securities and to provide services related to the exercise by the owner of the RDR of the rights secured by the represented securities. RDRs of one issue can certify the ownership of the represented securities of only one foreign issuer and only one type (category, type). The issuer of the securities presented must assume the obligations of T.N. Novozhilova, D.G. Khanin. Russian depositary receipts as a tool for Russia’s inclusion in the global stock market // Finance and Credit. - 2009. - No. 22. to the owners of RDRs, which are enshrined in the Agreement concluded with the issuer-depository. The contract is an integral part of the release decision. There is no requirement to accept such obligations only if the securities being represented are included in the quotation lists of foreign stock exchanges, the list of which is approved by the Federal Financial Markets Service of Russia. Main stages of RDR issue

1) Approval of the decision to issue RDRs by the authorized body of their issuer - the depository (no deadline has been established).

2) State registration of the RDR issue (RDR prospectus) (within 30 days from the date of receipt of the relevant documents).

3) Placement of RDR (placement period is not limited).

4) Appeal of RDR (after state registration of the issue).

5) Circulation of an additional issue of RDR (after registration of changes to the decision on the release of RDR (registered within 10 days from the date of submission of documents for registration), which come into force after 30 days from the date of disclosure of the message about such changes).

Additional issuance of RDRs is not subject to state registration and is carried out by amending the decision on the issuance of RDRs in terms of increasing the maximum number of RDRs issued that can simultaneously be in circulation. Persons participating in the issuance of RDRs:

· Issuer of RDRs is a depository created in accordance with the legislation of the Russian Federation, meeting the requirements for the amount of equity capital (own funds) established by regulatory legal acts of the Federal Financial Markets Service of Russia and carrying out depository activities for at least 3 years. Payments to holders of Russian depositary receipts are made by the issuing depositary in Russian rubles. The period for fulfilling obligations related to the implementation of these payments must not exceed 5 days from the moment the depositary receives the corresponding payments from the issuer of the underlying securities or from the moment the depositary receives the request of the owner of the Russian depositary receipt for the payment of funds instead of receiving the corresponding number of underlying securities.

· The issuer of the securities represented is a legal entity created in accordance with foreign law.

· The RDR registrar is the issuer-depository of the RDR or the registrar is a specialized organization that carries out activities to maintain the register on the basis of the issuer’s instructions.

· Custodian - a foreign registrar/depository that records rights to the securities represented and is included in the list approved by the federal executive body for the securities market.

· Russian Stock Exchange - a stock exchange on the territory of the Russian Federation that admits RDRs to trading with/without going through the listing procedure.

"Regulation of banking operations. Documents and comments", 2007, N 2
RUSSIAN DEPOSITORY RECEIPT ARE LEGALIZED
On January 10, 2007, the Federal Law of December 30, 2006 N 282-FZ “On Amendments to the Federal Law “On the Securities Market” was published in Rossiyskaya Gazeta. What operating prospects are now opening up for domestic companies and organizations? Will there be a Law help attract capital and foreign investors to the Russian economy or is this another point confusing our already cumbersome and complex legislation?
Goals and subject of the Federal Law
In order to increase the capitalization of the stock market in Russia, last year the State Duma of the Russian Federation received a proposal from the Central Bank of the Russian Federation to make some changes to the current Federal Law of April 22, 1996 N 39-FZ “On the Securities Market”. For about six months, work was carried out on the bill "On Amendments to the Federal Law "On the Securities Market", the draft was finalized and revised several times and was adopted by the State Duma in the third reading on December 8, 2006, approved by the Federation Council on December 22, 2006.
In accordance with the new Law, an addition to Art. 2 of the current Federal Law: another type of equity security appears - the Russian depositary receipt (hereinafter - RDR). With the acquisition of an RDR, its owner automatically receives ownership of the shares or bonds of a foreign issuer that are represented by this depository receipt, that is, he receives the right to payments and services agreed upon during the purchase due on the represented foreign securities. All responsibility for payments and provision of services rests with the RDR issuer.
The nominal value of the Russian depositary receipt is not provided. RDR is a bearer security and is issued in documentary form with mandatory centralized storage.
The essence of depository receipts is that the investor is given the opportunity to exercise the rights of the owner related to the use and disposal of securities of foreign issuers, while it will be very desirable if the investor and the foreign issuer remain within the national legal framework. In order to build a consistent relationship between an investor and a foreign issuer of securities, an intermediary is needed. The issuer of Russian depositary receipts can become such an intermediary.
About the issuer of Russian depositary receipts
According to the adopted Law, the issuer of a Russian depositary receipt can only be a depositary created in accordance with the legislation of the Russian Federation, possessing a certain capital (own funds) and having at least 3 years of experience in depository activities.
Article 7 of the Law “On Securities” has been supplemented with a part that sets out in detail the rights and obligations of the depositary and the depositor in accordance with the decision to issue Russian depositary receipts.
Namely, if the agreement between the depository and the depositor stipulates a service related to the receipt of income on securities and other payments due to the owners of securities, then:
- depositors’ funds must necessarily be in a separate bank account (accounts) opened by the depository in a credit institution, the so-called special depository account;
- the depository is obliged to provide the depositor with appropriate reporting on maintaining the securities account;
- funds of depositors located in a special depository account (accounts) cannot be levied against the obligations of the depository;
- the depository does not have the right to credit its own funds to a special depository account (accounts), except in cases of payment to the depositor;
- the depositary does not have the right to use in its own interests the funds located in the special depository account (accounts).
It should be emphasized that Part 15 specifically notes that all the requirements of Art. 7 on maintaining a separate bank account does not apply to credit organizations.
The obligations assumed by the depository must correspond to the rights that it receives in relation to the securities of a foreign issuer on the basis of an agreement concluded between them.
Before the issuer of depositary receipts can offer a Russian investor a product of a particular foreign market, he must study securities legislation, international private law rules and, if necessary, enter into an agreement with the issuer of the underlying securities in such a way as to exclude possible conflicts of legal norms of Russian and foreign legislation. If any credit organization acts as a depository, then its responsibilities will include resolving disagreements or any inconsistencies between the laws of the country of the issuer of securities and Russia, therefore, all responsibility for this process will lie with the Russian credit organization, which in this case will be the depositary of receipts.
As a rule, throughout the world, the issuers of depository receipts are not central or settlement depositories, but commercial banks. The Law does not take this point into account. Combining settlement and depository services for professional market participants and the functions of an issuer of securities will be quite risky for depository companies, although, in fact, this is technologically feasible and should not cause any conflicts with the law.
Procedure for issuing Russian depositary receipts
The existing Securities Law was supplemented by Art. 27.5.3 "Features of the issue and circulation of Russian depositary receipts."
The procedure for issuing depository receipts includes several stages:
- approval of the decision on the issue (additional issue) of Russian depositary receipts by the authorized body of their issuer-depository;
- state registration of the issue (additional issue) of Russian depositary receipts;
- placement of Russian depositary receipts.
The decision to release, in turn, in addition to all other information specified by this Federal Law, must contain:
- information about the name and location of the issuer of the securities being presented. That is, information about the issuer of those foreign shares or bonds that will be represented by a Russian depositary receipt;
- information about the type, category or type of securities presented;
- the rights that the represented securities provide to their owners;
- the number of securities, the ownership of which is certified by one Russian depositary receipt of a given issue (additional issue), that is, the number of foreign securities that is represented by one RDR;
- conditions for the placement of Russian depositary receipts, including the maximum number of Russian depositary receipts of an issue (additional issue) that can be in circulation at the same time;
- the rights of owners of Russian depositary receipts, as well as the procedure for the exercise (realization) by owners of Russian depositary receipts of the rights secured by the represented securities;
- the deadline for making payments due to the owners of Russian depositary receipts for the securities represented;
- list and amount of funds withheld by the issuer in connection with payments on the securities represented, as well as the grounds for such withholdings;
- certain obligations of the depository, including the obligation to provide, at the request of the owner of the Russian depositary receipt, the corresponding number of securities being represented.
Separately, cases are stipulated if the securities provided are shares. Owners of RDRs must send instructions to the depository on the voting procedure for such shares, and depositories, in turn, are obliged to exercise the right to vote on shares of a foreign issuer only in accordance with the instructions of the owners of Russian depositary receipts and provide them with voting results. Thus, the depositary will act as an intermediary between the owner of the RDR and the foreign issuer of shares, that is, assume full responsibility for fulfilling the requirements of the holder of the RDR, if they do not contradict Russian legislation and are specified in the agreement.
The decision to issue RDRs may not contain the term for their placement, that is, unlike the decision to issue other securities, the requirements establishing obligations to complete the placement no later than one year do not apply to depository receipts.
The prospectus for the issue of Russian depositary receipts must contain information about the securities being represented, as well as about the issuer of the foreign securities being represented.
The depositary is obliged to submit a report to the federal executive body for the securities market on a quarterly basis during the entire period of placement of Russian depositary receipts:
- on the results of the placement of Russian depositary receipts, containing information on the number of Russian depositary receipts placed in the reporting period;
- about the remaining number of Russian depositary receipts that the depository has the right to place within the maximum number determined by the decision on the issue of Russian depositary receipts;
- on the number of securities presented, the storage and recording of rights to which was provided by the depository.
When placing Russian depositary receipts, the depositary must ensure that the number of Russian depositary receipts corresponds to the number of securities being presented.
Public placement and (or) circulation of Russian depositary receipts is permitted only in the following cases:
- existence of an agreement with the issuer of the securities being represented;
- circulation of represented securities at auctions on foreign stock exchanges, the list of which is established by the federal executive body for the securities market.
Payments to owners of Russian depositary receipts are made by the issuer of Russian depositary receipts in the currency of the Russian Federation, unless otherwise established by the decision on the issue of Russian depositary receipts. The period for fulfilling obligations related to the implementation of these payments cannot exceed 5 days from the moment the depositary receives the corresponding payments from the issuer of the securities being represented. Such short deadlines for payments to holders of depository receipts impose a serious additional burden on the depositary.
If the owner of Russian depositary receipts has received from the depositary the corresponding quantity of the securities being represented or an amount of money instead of the securities being represented, the Russian depositary receipts are subject to redemption.
The Securities Law of 1996, in connection with the implementation of RDR, was supplemented by another important point, according to which the restrictions on the circulation of issue-grade securities contained in this Law do not apply to Russian depositary receipts and the securities they represent. Thus, the circulation of RDRs is allowed until they are fully paid and the state registration of the report on the results of the issue, and their public circulation is also allowed before the registration of the prospectus. Such relaxations on the part of the state most likely indicate a policy of encouragement, that is, maximum interest in the speedy launch of the circulation mechanism of Russian depositary receipts.
A fly in the ointment, or shortcomings of the Law
The Law pays little attention to the topic of organizing income payments under the RDR. The procedure for this procedure must be clearly stated. It is also necessary to establish a procedure for the secondary circulation of depositary receipts on the territory of Russia and determining the tax base of its participants. The Law does not contain a precisely formulated procedure for taxation of activities related to issuing and carrying out transactions with RDRs.
Another question regarding this document is the possibility of issuing financial instruments, including RDRs for shares of foreign credit organizations. The problem of participation in the capital of credit institutions primarily affects various aspects of banking regulation and banking supervision in relation to the receipt by the Bank of Russia of relevant information about the ultimate beneficiaries of credit institutions. The existing system for issuing American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) does not allow the Bank of Russia to receive in real time the information it needs as a supervisory authority. Today, the Bank of Russia does not have such opportunities to equate depository receipts with securities.
The problem of placing foreign securities on the domestic stock market arose a long time ago. On January 1, 2007, the Federal Law of December 30, 2006 N 267-FZ “On Amendments to the Federal Law “On Currency Regulation and Currency Control” came into force, allowing transactions between residents and non-residents without restrictions in the field of international transportation, which , of course, partially solves this problem. But it should be taken into account that only certain transactions with foreign securities that are carried out between residents are permitted by our currency legislation. The introduction of RDR will certainly facilitate the admission of foreign securities to the Russian organized market, but here too. there are pitfalls.
Theoretically, thanks to the adopted Federal Law of December 30, 2006 N 282-FZ "On Amendments to the Federal Law "On the Securities Market", the volume of foreign securities on the Russian market should increase, but there is a possibility of a technical problem such as the inability to reach an agreement with the relevant regulators foreign states on admission to public circulation on the domestic organized market of foreign securities. Unfortunately, such negotiations do not always provide an opportunity to smoothly organize the circulation of foreign securities in Russia. In addition, there is no certainty that foreign issuers will be interested in attracting capital in Russia. Russia with the help of depositary receipts. Plus, it will not be foreigners who will have to trade RDRs, but domestic brokers whose analytical departments process information about Russian companies. However, it will be difficult for them to calculate the features of other markets. Of course, you can use the reports of foreign companies, but selling other people’s ideas. thankless job. In any case, the issue of RDR is either a colossal additional burden on the analytical department of a brokerage company, or a semi-finished product. Perhaps, at the first stage, the matter will be limited to the issue of RDRs for shares of issuers of the CIS countries, primarily Ukraine, Belarus, and Kazakhstan, which are more understandable to our professional participants. Another option is for RDRs to be traded by subsidiaries of global investment companies present in all world markets.
RDR is a necessary innovation on the Russian stock market
Drawing a conclusion about the new Law adopted by the State Duma on December 8, 2006, it should be recognized that some unaccounted for details still remain: schemes for resolving contradictions that may arise when comparing our legislation and foreign ones have not been fully resolved. For example, it is mandatory to store all securities of a mutual investment fund in a special depository created in the form of a Russian joint-stock company, which, according to some analysts, is undesirable for general economic reasons, and is legally unacceptable for institutional investors.
Nevertheless, the necessity of the Law is also impossible not to recognize: the demand for foreign securities on the part of the Russian market is obvious, but the desire of foreign issuers to enter into the Russian legal field with their primary securities is not visible. From the point of view of domestic investors, the absence of foreign securities on the Russian market represents a significant problem, because the diversified development of investments in national liquid securities can only be achieved nominally. The political and economic situation in the country affects the diversification of investments more than the activities of the issuers themselves, this can be judged by the change in the price of most issues of shares that make up the MICEX index, which have correlation coefficients with changes in the index itself from 0.7 to 0.92.
Thus, the creation of an RDR is another attempt to integrate Russia into the world market and a way to attract foreign investors, perhaps even more successful than, for example, the IPO (initial public offering), which is very fashionable today among large organizations. Plans have already been announced for an IPO by VTB, Sberbank of Russia, JSCB ROSBANK and JSCB Gazprombank (CJSC). Of course, an IPO is an excellent tool for raising capital, providing the opportunity for a fair assessment of the company’s value and access to a target investor base. But in this way, placements move to foreign markets, which not only impedes the growth of the domestic market, but also negatively affects professional bidders. In 2004 - 2005 on Western exchanges through IPOs in the form of ADRs (American Depository Receipts), shares of Russian companies were placed for more than $4.7 billion, while the volume of initial placements on Russian exchanges for the same period amounted to only $622 million (12% of the total volume of initial placements of Russian companies). Russian depositary receipts should become an investment incentive in the national legal framework for private investors and the only opportunity, in the absence of foreign securities on the Russian market, to place securities of foreign issuers on domestic exchanges. VDRs will also facilitate the use of international diversification for companies managing investment funds.
Russia cannot escape the confrontation between the desire to harmoniously join the world economy and at the same time keep the maximum of its capital at home. The most reasonable price for this is the degree of openness of the economy, which, while simultaneously attracting foreign participants in the stock market, would exclude the uncontrolled export of capital in the event of an unfavorable situation. It is obvious that investing in RDR is a form of capital outflow that is more subject to government regulation than the investor’s free access to the global market. Consequently, the emergence of RDRs should be organized by the state and become an integral and integral part of the development of the stock market, and not the result of this development. It is possible that the market is not fully ready for this innovation now - not all banks will be able to master the RDR business in the short term, but all the necessary remaining transformations will have to occur as the Law takes effect. Most likely, this Law will entail a number of other innovations in Russian financial law.
E.V. Migol
Economic Process Analyst
State University -
High School of Economics
Signed for seal
12.03.2007

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