July 2013

New Rules for Depositary Activities

On 19 July 2013, Resolution No. 735 of the National Securities and Stock Market Commission approving a new regulation on carrying out of depositary activities (the "Resolution") became effective. The Resolution is aimed at implementation of the rules established by Law of Ukraine "On Depositary System of Ukraine" No. 5178-VI of 6 July 2012 (the "Law").

It is, however, worth noting that, as the main targets of the Resolution are the Central Depositary of Securities (the "Central Depositary") and the depositary institutions (the "Institutions"), the Resolution will actually become effective from the date when the Law takes full effect, i.e., from 6 October 2013.

The Resolution, inter alia, defines the procedures for:

  • depositary activities performed by the Central Depositary and the Institutions with regard to the provision of services on securities custody and accounting, accounting and servicing of acquisition, termination and transfer of titles to securities, rights deriving from securities, and limitations of title to securities on the securities accounts;
  • opening and maintaining securities accounts;
  • performing operations on securities accounts;
  • depositing securities into the depositary accounting system in the course of securities issue, their accounting, custody and withdrawal.

The key features of the depositary activities in Ukraine are:

  • right of the Central Depositary and the Institutions to perform depositary activities only in respect of securities issues which are assigned an International Securities Identification Number;
  • prohibition to perform depositary activities in respect of promissory notes (except for financial promissory notes) and mortgage notes;
  • prohibition to perform depositary activities in respect of securities which were issued in uncertificated form or converted into such a form in the course of dematerialization or conversion, without issuing a global certificate for the whole securities issue and its mandatory deposition with the Central Depositary;
  • requirement to keep with the Central Depositary (and according to its unified rules of displaying and transferring of information on securities accounting and circulation) the records of securities immobilized with a custodian, if such securities were not converted into uncertificated form and they were not transferred for custody to the Central Depositary's prior to the Law entry into force;
  • possibility to keep records of (i) title to a securities of a certain person– only by the Central Depositary and correspondent depositaries or their clients, and (ii) securities and rights deriving from them – by the Central Depositary only;
  • obligation of the Central Depositary to keep records of title to its own securities apart from records of title to securities owned by its deponents; etc.

The Resolution provides for a number of novelties to implement provisions of the Law, to further improve the depositary system of Ukraine and to create up-to-date mechanisms for servicing transactions of investors, including non-residents.

For further information please contact partner Vadym Samoilenko
and senior associate Oles Kvyat

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