I. Who Qualifies as a Foreign Investor for the Purposes of the Decree?
For the purposes of the Decree, foreign investors are defined as:
Individuals from unfriendly foreign states (“Unfriendly Persons”) making investments within the territory of the Russian Federation, including through the involvement of foreign individuals who are not Unfriendly Persons and who, in accordance with their personal law, maintain records and transfer rights to securities or perform any legal or factual actions in the interests of Unfriendly Persons;
Foreign individuals who are not Unfriendly Persons (“Friendly Persons”) making investments within the territory of the Russian Federation through the involvement of foreign individuals who maintain records and transfer rights to securities or perform any legal or factual actions in the interests of Friendly Persons.
(Jointly referred to as “Foreign Investors”).
II. What Exceptions are Provided for Transactions (Operations) of Foreign Investors?
The Decree excludes the application of core counter-sanction decrees to certain transactions (operations) carried out by Foreign Investors within the framework of investments in the Russian Federation.
III. To Which Transactions (Operations) Do the Exceptions Provided for in the Decree Apply?
The exceptions established by the Decree apply to:
The acquisition of Russian Securities (as defined below) by a professional securities market participant acting in the interests of a Foreign Investor (or a person acting on their behalf) during their initial placement or on organized trading venues conducted in accordance with Russian legislation, based on bids addressed to an unlimited number of trading participants, or the disposal of securities acquired in this manner;
The fulfillment of obligations to transfer payments to Foreign Investors on Russian Securities acquired in accordance with the procedures prescribed by the Decree;
The placement of funds by Foreign Investors in deposits (time deposits) with a Russian credit institution and the fulfillment of obligations to return those deposits;
The conclusion of contracts by Foreign Investors on organized trading venues conducted in accordance with Russian legislation, based on bids addressed to an unlimited number of trading participants, where the contracts are derivative financial instruments, and the fulfillment of obligations under those contracts.
IV. What is the Purpose of Introducing the New Type of Special Account – Account Type “I”?
A new type of special account – Account Type “I” – is being introduced for Foreign Investors. Account Type “I” accounts (including custody (personal) accounts) will be opened by credit organizations and non-credit financial organizations for:
Foreign Investors to make investments within the Russian Federation;
The accounting of:
Funds;
Shares of Russian Joint-Stock Companies (JSCs), Federal Loan Bonds (OFZs), and bonds of Russian issuers, the centralized record of rights to which (mandatory centralized custody) is maintained by a Russian depositary;
Investment shares of Russian Mutual Funds (PIFs)
(collectively – “Russian Securities”).
Requirements for the activities of credit organizations and non-credit financial organizations to implement the Decree and the account regime for Account Type “I” will be established by decisions of the Board of Directors of the Bank of Russia.
Foreign investments are made from funds credited to Account Type “I” accounts from accounts opened in foreign banks or other foreign financial market organizations, as well as from funds received from such investments.
Foreign persons maintaining records and transferring rights to securities in accordance with their personal law will have custody accounts of a foreign nominee holder of Type “I” opened by the Russian depositary. In this case, custody accounts of a foreign nominee holder of Type “C” will not be opened for such persons.
Monetary obligations to a Foreign Investor regarding:
Transactions (operations) completed in accordance with the Decree when making investments within the Russian Federation;
Contracts constituting derivative financial instruments;
Deposits (time deposits);
The transfer of Russian Securities;
Payments on Russian Securities acquired as a result of investments
must be fulfilled solely using Account Type “I” accounts.
V. What Funds Can Foreign Investors Transfer from Account Type “I” Accounts?
Foreign Investors may transfer from Account Type “I” accounts, including abroad:
Funds in rubles intended for making investments within the Russian Federation or received from such investments;
Funds in foreign currency intended for making investments within the Russian Federation, and foreign currency values received from such investments.
VI. What Operations are Permitted and Prohibited Using Account Type “I”?
The following operations are permitted using Account Type “I” accounts:
Currency exchange operations;
Transfers of funds and Russian Securities between Account Type “I” accounts when performing transactions (operations) in accordance with the Decree;
Operations for crediting and debiting Russian Securities when:
Performing transactions (operations) in accordance with the Decree;
Redemption, conversion (exchange), repurchase, or acquisition of Russian Securities in cases and procedures provided for by Federal Law No. 208-FZ “On Joint Stock Companies” dated December 26, 1995, and Federal Law No. 156-FZ “On Investment Funds” dated November 29, 2001;
Acquisition of Russian Securities by their issuer upon their redemption in cases and procedures provided for by Federal Law No. 39-FZ “On the Securities Market” dated April 22, 1996.
The following operations are prohibited using Account Type “I” accounts:
Making foreign investments in accordance with the Decree using funds credited to bank accounts that are not Account Type “I” accounts;
Withdrawing cash from Account Type “I” accounts.
VII. Who Will Be Authorized to Provide Official Clarifications on the Application of the Decree?
The Bank of Russia.