Moscow Exchange IPO Guide

Moscow
Exchange Group

«Changes in the regulatory framework relating to the admission of foreign securities to trading in Russia have led to trading of new instruments, such as foreign shares and depositary receipts, on Moscow Exchange»

PART 3. MOSCOW EXCHANGE — TRADING FLOOR FOR FOREIGN SECURITIES

Chapter 1. Introduction

1. Admission of Foreign Shares and Depository Receipts to public placement or trading

Under Russian law, shares of a foreign issuer (the "Foreign Shares") and securities (the "Securities") of a foreign issuer certifying rights to shares (the "Depository Receipts" and, together with the Foreign Shares, (the "Foreign Securities") may be admitted to public placement or trading in Russia (the "Admission") on the basis of a corresponding decision on the Admission taken by the Bank of Russia (the "Decision of the Bank of Russia") or a decision of a Russian exchange on the Admission of the Foreign Securities to organised trading (the "Exchange's Decision").

If in relation to the Foreign Securities the procedure for listing them on a foreign exchange included on the list approved by the Bank of Russia 1 (the "Approved Foreign Exchange") has commenced or been completed, then the Admission of such Foreign Securities to public trading on the secondary market may be effected on the basis of the Exchange's Decision — and in the absence of such a listing, on the basis of the Decision of the Bank of Russia. The Foreign Securities may be admitted to initial public placement in Russia only by the Decision of the Bank of Russia.

The above alternatives for the Admission differ in terms of the time required to complete the process and the requirements applicable to the Foreign Securities and their issuers, and also with respect to the documents that must be submitted to the Russian exchange or to the Bank of Russia.

It should be noted that in practice, the following situation may occur: the process of listing the Foreign Shares or the Depository Receipts of an issuer on an Approved Foreign Exchange has not taken place in the past and not taking place currently, but other Securities (e.g., Eurobonds) of the issuer are listed on that exchange. In such cases, the Admission of the Securities is possible only based on the Decision of the Bank of Russia; however, less stringent requirements apply to the content of the prospectus for foreign issuer's Securities (the "Prospectus") and to ongoing information disclosure in Russia than in a situation where no listing on an Approved Foreign Exchange has commenced/been completed with respect to any Securities of the issuer of shares or the Depository Receipts certifying rights to such Securities.

In this section, the Admission of the Foreign Securities under each of the alternatives referred to above 2, questions associated with the inclusion of the Foreign Securities on the list of the Securities admitted to trading on CJSC MICEX Stock Exchange (the "List") and indices, and also requirements on information disclosure after completion of the Admission process will be considered separately.

2. General requirements applicable to the Foreign Securities

Obligatory admission requirements for issuers of the Foreign Securities:

  • One of the national numbering agencies which is a member of the Association of National Numbering Agencies (ANNA) 3 has assigned an international securities identification number (ISIN) and a Classification of Financial Instruments (CFI) code to the Foreign Securities;
  • The issuer of the Foreign Securities: 1) has been organised in a country that is a member of the Organisation for Economic Co‑operation and Development (OECD), a member or observer of the Financial Action Task Force (FATF), a member of the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) 4 or a participant in the Single Economic Area; or 2) has been organised in a country with whose respective competent authority the Bank of Russia has entered into an agreement establishing terms of co-operation 5; or 3) has issued the Securities that have been listed on an Approved Foreign Exchange;
  • The rights to the Foreign Securities are recorded by a Russian depository that has opened an account with the foreign depository that is recording the rights to the Foreign Securities and has been included on the list prepared by the Bank of Russia 6;
  • In relation to the Foreign Securities neither Russian law nor foreign law establishes any restrictions on their being offered to the public in Russia.

Chapter 2. Admission of the Foreign Securities based on the Exchange's Decision

As noted above, the Foreign Securities in relation to which the process of listing them on an Approved Foreign Exchange has commenced or been completed may be admitted to public trading on the secondary market based on the Exchange's Decision 7.

1. General provisions

Admission of the Securities based on the Exchange’s Decision may take 30 to 50 business days and includes:

  • Selection of consultants and execution of agreements with them (including with a market maker and legal advisers);
  • Preparation of the Prospectus;
  • Preparation of a Russian-language summary of the Prospectus;
  • Acceptance of the Foreign Securities for servicing at the National Settlement Depository (the "NSD");
  • Filing of an application with Moscow Exchange to have the Foreign Securities included on the List, and submission of the documents specified in the CJSC MICEX Stock Exchange Listing Rules (the "Listing Rules");
  • Adoption of a decision by Moscow Exchange to include the Foreign Securities on the List;
  • Adoption of a decision by Moscow Exchange on the commencement date of trading in the Foreign Securities;
  • Commencement of trading in the Foreign Securities on Moscow Exchange 8.

2. Documents to be submitted to Moscow Exchange

The list of documents to be submitted to Moscow Exchange for the purposes of taking a decision on the Admission is set out in Appendix 1.9 of the Listing Rules and includes, among other things, the application for inclusion of the Securities on the List, the Securities questionnaire, the Prospectus, the summary of the Prospectus, the agreement on listing services with Moscow Exchange (if one was not concluded earlier), a letter declaring that public trading in the Foreign Securities does not contravene Russian law or foreign law (including the lex personalis of the issuer of the Foreign Securities and the lex personalis of the Approved Foreign Exchange) 9, as well as the constitutional documents of the issuer of the Foreign Securities 10.

Prospectus requirements

For the purposes of procuring the Admission based on the Exchange's Decision, the Prospectus must be filed with Moscow Exchange 11. If the Admission of the Foreign Securities is to take place within three years after the date when the Securities were listed on an Approved Foreign Exchange, the Prospectus must include a translation of the foreign prospectus or offering memorandum that was used for the purposes of the listing on the Approved Foreign Exchange, as well as a translation of the issuer's annual reports for that period. The content and scope of the information provided in the Prospectus must be compliant with the Listing Rules. In practice, it may be necessary to integrate the annual reports into the Prospectus in order to make the document more convenient for review by the Exchange and investors.

If, on the other hand, the Admission of the Foreign Securities is to take place after three years have passed since the date when the Foreign Securities were listed on an Approved Foreign Exchange, the Prospectus must include the same scope of information as the issuer's annual reports for the last three years, as well as information on the Foreign Securities being admitted 12.

The Prospectus must be signed by the issuer or by a Russian broker that meets the requirements established by the Bank of Russia.

3. Acceptance of the Foreign Securities for servicing at National Settlement Depository

One of the prerequisites for the Admission of the Foreign Securities on the basis of the Exchange's Decision is acceptance of the Securities for servicing at the NSD. To this end, the issuer is to file a request with the NSD for acceptance of the Securities for servicing (in no particular form, but the ISIN must be indicated) and (if necessary) other documents as agreed with the NSD. In practice, the decision on acceptance of servicing tends to be taken by the NSD two or three business days after the necessary documents are received.

4. Disclosure at the stage of the Admission of the Foreign Securities

At the stage of the Admission, issuers of the Foreign Securities are required to disclose information on the adoption of the Exchange's Decision and to procure that the information contained in the Prospectus is available to all interested parties. The specific time frames and procedure for disclosing that the Admission has been granted are set out in the Regulations on the Information Disclosure.

The Prospectus must be published (indicating the CFI code and ISIN, as well as the date of the Exchange's Decision) on the issuer's website, on the website of Moscow Exchange and on the website provided by one of the information distributors on the securities market before the Foreign Securities begin to be publicly traded.

Chapter 3. Admission of the Foreign Securities based on the Decision of the Bank of Russia

1. Requirements applicable to the Foreign Securities and issuers

The Foreign Securities and their issuers must meet the general requirements set out in Chapter 1 of this section.

In addition, the Foreign Securities that have not been listed on an Approved Foreign Exchange must meet a number of requirements in terms of liquidity and the level of investment risk: the liquidity ratio for the Foreign Securities must not be lower, and their investment risk level must not be higher than the respective figures calculated for the Securities of the same class (category, type) that have already been admitted to organised trading on a Russian exchange 13. A decision indicating that these parameters meet this requirement must be obtained from Moscow Exchange in advance.

2. General provisions

Admission of the Foreign Securities based on the Decision of the Bank of Russia may take 70 to 90 business days 14 and includes:

  • Preparation of the Prospectus;
  • Filing a request for a decision by Moscow Exchange containing reasoning for the Admission of the Foreign Securities as well as a document containing computing the liquidity and investment risk ratios of such Securities (a "Decision of the Exchange on the Possibility of the Admission and Computing of Liquidity and Investment Risk Ratios");
  • Computing by Moscow Exchange of liquidity and investment risk ratios of the Foreign Securities;
  • Acceptance of the Foreign Securities for servicing at the NSD (except in cases when the Foreign Securities are admitted to public placement);
  • Filing of documents with the Bank of Russia to register the Prospectus and the Admission and adoption of the decision by the Bank of Russia on registration of the Prospectus and the Admission;
  • Filing an application with Moscow Exchange to have the Foreign Securities included on the List and adoption of a decision by Moscow Exchange to include the Foreign Securities on the List;
  • Adoption of a decision by Moscow Exchange on the commencement date of trading;
  • In the event of the admission of the Foreign Securities to a public placement — placement of the Foreign Securities and filing of a notification on completion of the placement;
  • Commencement of trading of the Foreign Securities on Moscow Exchange.

3. Procedure for adoption of the Decision of the Bank of Russia on the Admission

In accordance with the Procedure for Registration of the Securities Prospectus of Foreign Issuers 15, the general period for adoption of the Decision of the Bank of Russia on the Admission and registration of the Prospectus is 30 days 16 from the date of submission of the necessary documents to the Bank of Russia.

In order to obtain the Decision of the Bank of Russia, inter alia, the following documents shall be submitted to the Bank of Russia: an application for registration of the Prospectus of the Foreign Securities and for the Admission, together with the Prospectus itself; certified and legalised copies of constitutional documents of the foreign issuer; a statement confirming compliance of placement and/or public trading in the Foreign Securities with requirements of lex personalis of the issuer signed by the issuer; certified and legalised copies of decisions of authorised bodies of the foreign issuer 17; and the Decision of the Exchange on the Possibility of the Admission and Computing of Liquidity and Investment Risk Ratios.

These documents shall be provided in Russian or in a foreign language with an attached notarised translation into the Russian language.

Prospectus requirements

As a general rule, the Prospectus shall be drawn up in accordance with the rules applicable to securities prospectuses of Russian issuers 18 when the Admission is based on the Decision of the Bank of Russia. In this case, the Prospectus shall contain, inter alia, information on the financial and economic position of the issuer, results and trends of its activity, information on the participants of the issuer, information on the members of the management bodies of the issuer (indicating the amount of their remuneration), as well as information on the Foreign Securities being placed or admitted for trading 19.

Consolidated and individual financial statements of the issuer for the last three completed reporting years prior to the date of the Prospectus’s approval, as well as interim financial statements of the issuer for the last completed reporting quarter prior to the date of the Prospectus’s approval, shall be attached to the Prospectus 20. The audit report shall be attached to the annual financial statements.

If any other Securities of the foreign issuer (other than the Foreign Securities, which are in the process of the Admission) are listed on an Approved Foreign Exchange, the Prospectus (to the extent it does not relate to the Foreign Shares or the Depository Receipts that are being admitted) may be a Russian translation of the prospectus submitted to an Approved Foreign Exchange for the listing of other Foreign Securities, and of the latest annual reports of the issuer 21.

The Prospectus shall be signed by the issuer.

4. Decision of the Exchange on the Possibility of the Admission and Computing of Liquidity and Investment Risk Ratios

The Decision of the Exchange on the Possibility of the Admission and Computing of Liquidity and Investment Risk Ratios shall be issued by Moscow Exchange within 14 days 22 from the date of submission of the issuer’s application, the Prospectus signed by the issuer and the agreement with the market-maker.

5. Acceptance of the Foreign Securities for servicing at National Settlement Depository

In general, the procedure and time frames for acceptance of the Foreign Securities for servicing at the NSD are similar to the relevant procedure and time frames applicable to the Admission of the Foreign Securities based on the Exchange’s Decision.

6. Procedure for adoption of a decision by Moscow Exchange to include the Foreign Securities on the List

The decision to include the Foreign Securities on the List shall be adopted by Moscow Exchange within 13 to 20 business days (depending on the section of the List) 23 after submission of the documents specified in the Listing Rules.

7. Information disclosure at the stage of the Admission of the Foreign Securities based on the Decision of the Bank of Russia

Issuers of the Foreign Securities at the stage of the Admission based on the Decision of the Bank of Russia are obliged, inter alia, to disclose information on the adoption of the above Decision of the Bank of Russia, as well as to provide any interested parties with access to the information contained in the Prospectus 24.

In the case of a public placement of the Foreign Securities, in addition, the following information shall be disclosed: date (including any changes to it) and price (pricing procedure) of placement, suspension, renewal or completion of placement, as well as the submission to the Bank of Russia of a notification on completion of the placement 25.

Chapter 4. Inclusion of the Foreign Securities on the List

In accordance with the Procedure for the Admission of the Foreign Securities to trading (the "Procedure for the Admission of the Foreign Securities to Trading") 26 and the Listing Rules, the Foreign Securities may be included on one of the following sections of the List: Level 1, Level 2 and Level 3.

1. Requirements for the Foreign Securities to be included on the List

Requirements applicable to the Foreign Securities to be included on Level 3 of the List generally correspond to general requirements for admission to public placement or trading 27. Under the Listing Rules, the following additional requirements apply for the inclusion of the Foreign Securities to Level 3: 1) the foreign issuer shall undertake to submit information to Moscow Exchange for its disclosure, or Moscow Exchange shall undertake to disclose such information; and 2) if the Depository Receipts are being included on the List, the issuer of the receipts (or the issuer of the shares represented by the receipts) shall undertake to disclose information on the receipts and on the issuer of the shares represented by the receipts.

The Foreign Securities can be included on Level 1 and Level 2 if either: 1) they are listed on a foreign exchange 28, or listing procedure has been started in relation to such Foreign Securities, or 2) certain requirements of the Listing Rules are complied with. Such requirements relate to: 1) the number of securities in free float and their market value, 2) the duration of the issuer’s existence, 3) the disclosure and publication of the financial statements, and 4) corporate governance 29.

2. Procedure and time frames for inclusion of the Foreign Securities on the List; documents for submission to Moscow Exchange

The time frames for the inclusion of the Foreign Securities on the List depend on the section of the List and generally range from 13 (for Level 3) to 20 business days (for Level 1 and Level 2) after the date of submission of the issuer’s application and the required documents to Moscow Exchange 30.

In addition to the relevant documents referred to in Chapter 2 of this section, a report on compliance with the corporate governance requirements, as well as consolidated (or individual) financial statements for the previous three years (for Level 1) or one year (for Level 2) and (an) audit report(s) for such statements shall be submitted for the inclusion of the Foreign Securities on Level 1 and Level 2 31.

The Listing Rules provide for ongoing filing of certain documents with Moscow Exchange after inclusion of the Foreign Securities on the List 32.

Chapter 5. Inclusion of the Foreign Securities to indices

Under Russian law, inclusion in a basic index is currently available both for the Foreign Shares and the Depository Receipts. At the same time, requirements applicable to the Foreign Securities as well as procedures for their inclusion in the basic index generally correspond with similar requirements and procedures established for the shares of the Russian issuers.

Chapter 6. Information Disclosure Requirements after the Admission of the Foreign Securities

1. General information disclosure requirements

The Regulations on Information Disclosure provide for two forms of information disclosure by the issuers: statements of material facts and quarterly reports.

If the Foreign Securities are admitted based on the Decision of the Bank of Russia, the statements of material facts and the quarterly reports of the foreign issuer shall be drafted in the form established by the Regulations on the Information Disclosure for Russian issuers of the Securities, subject to the lex personalis of the foreign issuer.

If the Foreign Securities are admitted based on the Exchange’s Decision, material facts are defined as such information that should be provided to a foreign exchange (or to a special organisation) under foreign law and the rules of the foreign exchange. The statement of material fact shall be: 1) provided to Moscow Exchange in Russian and/or English language simultaneously with the disclosure of the relevant information to the foreign investors; and 2) published in Russian or in the foreign language not later than one day (for disclosure on a news feed) and two days (for disclosure on a web page) after the relevant statement is published in accordance with the rules of the foreign exchange. If the original publication was made only in the language that is not recognized on international financial markets, such a statement shall be published, in each case, in the Russian language not later than 30 days after the date when it was published in accordance with the rules of the foreign exchange. At the same time, the ongoing disclosure of material facts may be carried out in the form of press releases and other communications that are to be disclosed by the issuer under the foreign rules applicable to the foreign issuer.

Foreign issuers are also required to publish their annual/semi-annual/quarterly reports (depending on the frequency of publication of these reports under foreign law/rules of the Approved Foreign Exchange) as follows: 1) in Russian or foreign language, no later than one day after their disclosure to foreign investors; 2) in Russian (if the original publication was made only in the language that is not recognized on international financial markets), no later than 60 days after the relevant report is published on a web page. An annual/semi-annual/quarterly report shall also be submitted to Moscow Exchange in Russian and/or English simultaneously with its disclosure to foreign investors.

2. Requirements regarding insider information disclosure

Issuers of the Foreign Securities shall comply with the requirements of Russian legislation against illegal usage of insider information and market manipulation, including the requirements for the disclosure of insider information, maintaining a list of insiders, as well as the filing of such list with Moscow Exchange and the Bank of Russia (at its request).

  1. The list of such exchanges is set out in the Ordinance of the Bank of Russia dated 28 January 2016 No. 3949-U and comprises 66 foreign exchanges, including, inter alia, the London, New York, Hong Kong and Frankfurt stock exchanges.
  2. Except for the Admission of the Foreign Shares through the "unsponsored" programmes (based on the agreement with a broker/a holder of the Foreign Securities rather than directly with the issuer of the Foreign Shares).
  3. NCO ZAO National Settlement Depository acts as the national numbering agency for Russia.
  4. The lists of the OECD member states, the FATF member states and/or observers and the MONEYVAL member states are available at the following websites: www.oecd.org, www.fatf-gafi.org at «About the FATF» and www.coe.int at «Human Rights», respectively.
  5. For the list of such states, see the website www.cbr.ru
  6. The list of the foreign depositaries is set out in the Ordinance of the Bank of Russia dated 22 June 2016 No. 4050-U.
  7. Under the Listing Rules, the decision on inclusion of the Foreign Securities in the List is considered as such a decision.
  8. If the Exchange’s Decision is taken before the completion of the listing of the Foreign Securities on an Approved Foreign Exchange, trading with the Foreign Securities on Moscow Exchange shall not be commenced earlier than the commencement date of trading with such Securities on the Approved Foreign Exchange.
  9. In accordance with the Listing Rules, such a letter shall be signed by an issuer or by a legal adviser.
  10. If the Foreign Securities are included on Level 1 or Level 2 of the List, additional documents shall be submitted (see the webpage). All the documents (excluding constitutional documents) shall be submitted in the Russian language or in a foreign language with an attached translation into Russian. The translation must be notarised or made on a letterhead of the organisation that provided the translation, sealed and signed by the translator and the head of such an organisation.
  11. Following the amendments to the Law on Securities Market that came into force on 2 August 2014, the Prospectus may be drafted in a foreign language used on the financial market.
  12. The scope of such information is determined by section VIII of part «B» of Schedule 2 of Regulations of the Bank of Russia No. 454-P "Regulations on Information Disclosure by the Issuers of Securities" dated 30 December 2014 (the "Regulations on the Information Disclosure") and includes, inter alia, information on the scope of rights attached to the Foreign Securities, and the terms of their trading.
  13. Procedure for computing the liquidity ratio and level of investment risk is set out in the Order of the FSFM No.10-5/pz-n dated 9 February 2010.
  14. The indicated time frame includes, inter alia, the time periods for: 1) drafting the Russian prospectus (10 to 20 business days), 2) preparation of the decision by Moscow Exchange containing reasoning for the Admission of the Foreign Securities to public trading (placement in Russia) as well as computing the liquidity ratio and level of investment risk, 3) adoption of a decision by the Bank of Russia on the Admission and registration of the Prospectus, and 4) adoption of a decision by Moscow Exchange on inclusion of the Foreign Securities on the List.
  15. The Order of the FSFM No. 12-10/pz-n dated 6 March 2012 (the "Procedure for Registration of the Securities Prospectus of Foreign Issuers").
  16. The referred period may be extended on the basis of a decision of the Bank of Russia in the events specified in the Procedure for Registration of the Securities Prospectus of Foreign Issuers, but no longer than for 60 days.
  17. If in accordance with the lex personalis of the foreign issuer, adoption of such decisions is required for public trading (placement) of the Foreign Securities in Russia.
  18. Following the amendments to the Law on the Securities Market that came into force on 2 August 2014, the Prospectus may be drafted in a foreign language that is used on the financial market, when the Foreign Securities were admitted to trading.
  19. The detailed list of information is set out in part «B» of Schedule 2 of the Regulations on the Information Disclosure. Such information shall be provided in the Prospectus where it is relevant to the Foreign Securities/an issuer, subject to the lex personalis of the issuer.
  20. Financial statements shall be prepared in accordance with International Financial Reporting Standards (IFRS) or in accordance with other internationally recognised standards (for example, US GAAP).
  21. For more information on the scope of the Prospectus, click here.
  22. Formally, the period for adoption of such a decision by Moscow Exchange and for computing the liquidity ratio and level of investment risk is not established. In practice, it takes from one to two weeks.
  23. Requirements, compliance with which is required for inclusion of the Foreign Securities in the specific section of the List, are set out here.
  24. Requirements for information disclosure within the Admission based on the Exchange's Decision apply to the procedure for disclosure of such information accordingly (click here).
  25. Such information shall be disclosed in a news feed and on a web page within the time frames established by chapter 85 of the Regulations on the Information Disclosure.
  26. Approved by the Regulations of the Bank of Russia dated 24 February 2016 No. 534-P.
  27. The general requirements include: 1) assignment of the ISIN and СFI codes, 2) listing of the Foreign Securities on an Approved Foreign Exchange/adoption of the Decision by the Bank of Russia, as well as 3) acceptance of the Foreign Securities for servicing at the NSD.
  28. The list of such lists for inclusion on Level 1 of the List is set out in Schedule 6 of the Listing Rules and includes, inter alia, the Premium Segment and the Standard Segment of London Stock Exchange, as well as the Prime Standard and the General Standard of Frankfurt Stock Exchange. The list of lists of the foreign exchanges for inclusion on Level 2 of the List is approved by Moscow Exchange.
  29. For the detailed analysis of the referred requirements, see "Part 4. Corporate governance."
  30. The referred periods may be extended in certain cases specified in the Listing Rules.
  31. Submission of such documents is not required if the Foreign Securities are included on a list of an exchange specified in Schedule 6 of the Listing Rules or are included in a list additionally approved by Moscow Exchange.
  32. The list of such documents and frequency of their submission are provided for in Schedule 1.10 of the Listing Rules.