Draft decision on action procedure for depository institutions located in Donetsk and Lugansk regions and Crimea

On August 29, 2014 the National Commission for Securities and Stock Market (hereinafter, the  NCSSM) published the Draft Law "On preventing violations of investors’ rights and avoiding the  risks of professional participants" ¹ (hereinafter, the Draft) on its website.

The Draft defines the action procedure for professional stock market participants, in particular  for the Central Depository, the Settlements Center and depositary institutions located in the ATO  zone until the completion of the ATO in the East of Ukraine as well as for depositary institutions  located in the ARC and Sevastopol.

In particular, depository institutions located in the ATO zone, unless they are able to fulfill any  of their func- tions in the manner established by the law, are advised to temporarily change their  location by moving it outside the borders of Donetsk and Lugansk regions, Crimea and Sevastopol.  This step is required for the period of ATO until the operation is completed and conditions are  created to resume professional activities.

In case of failure to change their location depository institutions should transfer data bases of  depositary records to the Central Securities Depository. After that, registration operations,  fulfillment of obligations and transfer of shareholders’ lists, etc. will be suspended.

The Settlements Center (having received the Central Depository’s notice of accepting data bases  from de- positary institutions) will stop accepting obligations under agreements regarding  securities for their fulfillment. This applies primarily to settlements under agreements that  require registration operations with securities accounts of depository institutions specified in  the notice of the Central Depository, and of their depositors.

Moreover, the Central Depository will stop providing the lists of shareholders, who should be  informed about the general shareholders’ meeting of a joint stock company, of shareholders entitled  to participate in the general shareholders meeting, and registers of owners of registered  securities to convene and hold a general meeting, if it should be held in the ATO zone in the East  of Ukraine.

The NCSSM strongly recommends that depositary institutions should use the service of protected  storage of depositary database backups developed by the Central Depository in accordance with the  powers provided to it under the Law of Ukraine "On the Depositary System of Ukraine"² before the  above Decision comes into effect.