The authorities discussed the investment threshold for the exchange of assets with foreigners

The scheme for exchanging assets with foreigners is first supposed to be extended to investors with portfolios up to ₽100 thousand, RBC learned. But without permission from regulators in the EU , non-residents may not want to participate, lawyers fear View of the building of the Central Bank of Russia

The exchange of frozen assets of foreigners and Russians under the scheme announced by the Ministry of Finance and the Central Bank may primarily affect investors with portfolios of up to 100 thousand rubles, two sources in the financial market told RBC and confirmed the head of the National Association of Stock Market Participants (NAUFOR) Alexei Timofeev .

“The option is being discussed that at the first stage, the unlocking described by the Ministry of Finance and the Bank of Russia will affect retail investors with portfolios up to 100 thousand rubles. This is the majority of investors affected by the blocking, if we keep in mind their number. But we expect that if this stage is successful, at the next stage the opportunity to unlock assets will be given to investors with portfolios of more than 100 thousand rubles, which own the bulk of the blocked assets,” Timofeev said.

The scheme assumes that foreigners will buy blocked foreign securities from Russians for money from C accounts. On August 23, the Central Bank itself indicated that it would primarily affect retail investors. The regulator did not specify whether there would be any restrictions on the size of the portfolio.

According to Finance Minister Anton Siluanov, the assets of 3.5 million Russian investors in the amount of 1.5 trillion rubles are now blocked. The Central Bank previously estimated the total amount of blocked assets (that is, taking into account the assets of organizations) at 5.7 trillion rubles.

How do you plan to select investors?

Discussions about how exactly investors will be selected who will take part in the exchange in the first place have been ongoing for a long time, said Yevgeny Konovalov, senior lawyer at the Delcredere Bar Association.

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“One of the common models is to issue retail investors with small portfolios who cannot protect their interests in European jurisdiction by paying lawyers,” he explains. According to Konovalov, the choice of this particular model is most likely in the current conditions.

On the other hand, too small investors will either not want to take part in such a complex and lengthy transaction, or foreign investors will not be interested in acquiring small blocks of blocked securities, notes Aram Grigoryan, a lawyer and partner at Nektorov, Saveliev & Partners (NSP).

In addition, Russian investors may not be interested in exchanging foreign assets for money, the expert continues. “Not all investors may be happy with such an offer, especially those who have been oriented to investing in foreign markets for a long time. It is obvious that the calculations will be carried out in Russian rubles, and it is very interesting how the value of securities will be calculated and at what rate these calculations will be carried out, ”the expert argues.

As for investors with large portfolios, other unlock options can be used for them, suggests Grigoryan. “There are large foreign investors who are currently trying to structure the so-called swap transactions (the exchange of assets of foreign investors for the assets of Russian investors). But in these cases, we are talking about very large assets, worth tens of billions of rubles, ”the expert notes.

The largest Russian brokers, to which RBC sent inquiries, did not comment on the possible mechanism for selecting investors on the merits. “The decision announced by the [Bank of Russia] looks attractive, and we are waiting for more information and details on how to move in the presented plan,” said Oleg Chikhladze, director of the brokerage business at BCS Mir Investments. “Russian retail investors, not included in any sanctions lists, suffered from the actions of foreign states, in fact, they were unfairly deprived of the opportunity to dispose of their assets. We support and welcome the protection of their interests,” the VTB representative noted.

“Professional participants as elements of the financial infrastructure are not prevented from participating in such transactions. Moreover, such participation is likely to be mandatory, ”Dmitry Lesnov, head of the Finam client service development department, told RBC. At the same time, the size of the portfolio, apparently, will not matter, he believes.

What difficulties may arise during transactions

Transactions to buy securities from Russians entail a number of consequences for foreigners, Konovalov said. “In the event of an exchange, the foreigner will have securities that continue to be accounted for through sub-sanctioned entities (for example, the National Settlement Depository, which has been under EU sanctions since June 2022. -), respectively, actions with such an asset are possible only on the basis of the permission of the relevant European regulator” , the expert explains.

European regulators can issue such permits, including to Russian persons. They were previously applied by Russian brokers, management companies and individuals, but so far only a few cases of approval of such applications are known. “Perhaps it will be easier for Europeans to obtain such permission, however, the deadlines established by the blocking regulations for filing applications for many sanctioned persons have already expired or are about to expire,” Konovalov continues.

At the same time, Western officials do not yet know anything about the scheme proposed by the Russian side, the Financial Times wrote. According to the publication, no negotiations on a potential asset swap are currently underway. One of the sources of the publication noted that detailed discussions of this topic are hardly possible in the near future.

A change in the owner of securities in a sanctioned depository may be regarded by the European regulator as a transaction with a sanctioned entity, which is prohibited by sanctions regulation, which entails additional risks for foreigners, warns Konovalov.

Russian regulations are not enough for this mechanism to work, since in addition to the permission of the Russian authorities, a foreign investor will need to obtain the consent of European regulators for the transaction (we are talking about the Treasury of Belgium, to which the Euroclear depository is subordinate, and the Ministry of Finance of Luxembourg, to which Clearstream is subordinate), confirms Grigoryan. If these permits are not available, the assets that foreigners will acquire with money from C accounts will remain blocked in European depositories.

“But if there is already an agreement between the Central Bank and European regulators on the development of a common mechanism of work, then the solution of the issue is simplified. Meanwhile, we are not aware that European regulators have recently come up with such initiatives,” the expert concludes.

The Ministry of Finance, the Central Bank, Euroclear and Clearstream did not respond to requests from RBC.