MOSCOW, December 19. /TASS/. The St. Petersburg (SPB) Exchange has green-lighted a strategy for unblocking assets, which presupposes that the bourse’s settlement depository will request approval from the US Treasury Department’s Office of Foreign Assets Control (OFAC), the leading Russian securities trading platform said in a statement.
"SPB Exchange has approved a strategy proposed by international legal consultants. According to the strategy, SBP Bank, the settlement depository of SPB Exchange, which records foreign securities and the cash funds in foreign currency of securities trading participants and their clients, is drafting an official request to OFAC with proposals for the following mechanisms for unblocking assets," the statement reads.
Moreover, SPB Exchange intends to carve the settlement depository out from under its control via reducing the bourse’s stake in the depository’s equity capital.
US sanctions administrator OFAC imposed sanctions on SPB Exchange on November 2, after which the exchange’s foreign counterparties suspended working with the trading venue so as to avoid any liability for violating the US sanctions regime, including secondary sanctions. All foreign counterparties, including partners from Russia-friendly jurisdictions, must take such sanctions risks into account.
During negotiations with the exchange, US counterparties and US-linked counterparties confirmed that they were not prepared to operate under the relevant OFAC general license, as it does not cover transactions stemming from asset withdrawals, the exchange clarified. Counterparties from Russia-friendly jurisdictions suspended processing of any requests from companies under SPB Exchange’s clearing and settlement infrastructure related to transactions with assets due to the performance of compliance procedures. Negotiations with these counterparties are continuing.
"Since sanctions were imposed, SPB Bank and international lawyers have been jointly preparing a request to OFAC, as well as a substantial set of documents, confirming that no profits are earned on the unblocking of assets for the given sanctioned legal entity. In the next month, SPB Bank will take all necessary steps aimed at establishing working interactions with OFAC for discussing the aforementioned mechanisms for unblocking assets," the exchange said. The timeframe for implementing the exchange’s strategy is not linked to the expiration on January 31, 2024 of OFAC’s Russia-related General License 76A, "Authorizing the Wind Down of Transactions Involving Certain Entities Blocked on November 2, 2023," but rather will be determined at OFAC’s discretion and based on which asset unblocking mechanism is ultimately approved.
That said, an investor’s ownership of foreign securities will persist irrespective of the timeframe for unblocking of assets and under any scenario for the further development of the situation. The investor will remain the ultimate owner of the securities. Trading participants and their clients will also be entitled to apply to OFAC independently for obtaining individual special permits for the withdrawal of foreign assets from SPB Bank for their subsequent transfer to other, unsanctioned depositories. This process may occur concurrently with the strategy being implemented by SBP Bank.