Sergey Tarasevich has commented for RBC on the option of paying investors income on frozen foreign assets being considered by SPB Exchange

Since 2 November 2023, as a result of the blocking US sanctions on SPB Exchange, trading in all foreign assets on the exchange was halted and foreign assets already owned by the investors totalling $3 bn were blocked.

SPB Exchange is currently discussing with Russian regulators the possibility of extending to the frozen assets of its clients the mechanism of payments under Presidential Decree No. 665. Recall that the directive, which, among other things, described the mechanism for paying Russian investors income on their foreign assets, was signed by Vladimir Putin in early September 2023, ruble payments of income on foreign securities began at the end of 2023. Sergey Tarasevich, Associate at Tax & Administrative Law Practice at Maxima Legal, told RBC that the mechanism is working effectively, ‘some clients have received almost all the money due to them under this decree’.

However, as the expert emphasised, in order to apply the decree to the assets blocked on SPB Exchange, it is necessary to change the period for which the payments are compensated. In addition, Sergey Tarasevich added that since now the payments are made only for assets recorded through the National Settlement Depository (NSD), while assets recorded through SPB Bank (the depository of SPB Exchange) are not always recorded at NSD, the procedure of interaction between NSD and SPB Bank will need to be regulated.

‘The position of investors will strongly depend on what their assets have been frozen. If mainly SPB Exchange has frozen shares of growth companies that do not pay dividends, this mechanism is unlikely to be useful for investors. At the same time, those investors who have frozen bonds or shares of companies paying stable dividends will find themselves in a more favourable situation,’ Sergey summarised.

At the same time, even if dividends and coupons are received under Decree No. 665, unblocking of assets on SPB Exchange is possible only under licence from OFAC (Office of Foreign Assets Control of the USА). According to Sergey Tarasevich’s assessment, the launch of the mechanism with regard to the assets blocked on SPB Exchange will not have a negative impact on the procedure of unblocking assets through OFAC. Some assets were initially frozen by Euroclear and Clearstream, and so far there were no grounds for not issuing personal licences due to the effect of Decree No. 665, Sergey Tarasevich shared. ‘We believe that this should not become a stumbling block in this case either,’ explained the Associate.

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