In an effort to adopt international securities custody best practices, the Ukrainian securities regulator has overhauled its rules for holding foreign securities by Ukrainian residents.1
Ukrainians can now own foreign securities with standard international codes (ISIN), such as most foreign equities and bonds issued by foreign issuers, as well as depositary receipts through securities accounts opened with local securities depositaries.
The Foreign Securities Regulation sets out a new procedure for the admission of foreign securities into the Ukrainian market, which is much easier to follow and includes these major changes:
- Foreign issuers no longer need to have assets in Ukraine.
- Foreign issuers are no longer required to enter into an agreement with the Ukrainian stock exchange as a precondition for foreign securities to have access to the market, though they are required to cooperate with the exchange for securities listing purposes afterward.
- The Securities Regulator will not apply any restrictions as to the number of securities that can be admitted to the Ukrainian market.
- Admitted securities can be traded both at the stock exchange or via OTC markets.
- The Securities Regulator has substantially reduced the number of documents to be submitted for admission of foreign securities into custodian accounts of Ukrainian depositaries.
The new rules significantly expand the possibilities Ukrainian residents may have for dealing with foreign securities. Ukrainian depositary institutions (commercial banks and other securities custodians) can now offer their services in respect of a wider range of instruments, including blue chip stocks and investment-rated or high-yield bonds.
With local securities accounts, Ukrainian residents may now access many of the traditional stock options and other equity incentive programs that international businesses implement.
1Resolution No. 871 of the National Securities and Stock Market Commission of Ukraine (Securities Regulator) "On Amending Regulation for Admission of Foreign Securities to Circulation in Ukraine" dated 7 December 2017 and which came into force on 6 February 2018 (Foreign Securities Regulation).
Initial version of the Foreign Securities Regulation effectively provided for admission of foreign securities issued by Ukrainian businesses, therefore, investors did not have access to other foreign securities on the Ukrainian market.
This legal alert is issued to inform Baker McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.