On 19 June new securities regulations came into force that have an effect on share based incentive schemes in Russia

On 19 June 2011 new securities regulations came i...

The long-awaited set of rules that regulate the circulation of non-Russian securities and securities designated for qualified investors went into force on 19 June 2011. These rules establish a legal framework (from a Russian securities law perspective) for employee incentive plans (for example: stock options, deferred options, restricted shares, etc.) under which non-Russian securities are granted to individuals in Russia (‘Plans’). In particular, these rules eliminate certain restrictions on offering non-Russian shares under Plans in Russia.


As you may know, under the Russian securities law effective as of mid-May 2009, foreign securities that have not been admitted for public offering and/or public trading in Russia could not be offered in Russia to ordinary individuals (i.e. who have not been recognized as qualified investors: brokers, dealers, banks, investment funds, etc). Therefore, some Plans were at risk of being non-compliant with Russian securities law.

On 5 April 2011, the Federal Service for Financial Markets (the ‘FSFM’) adopted order No. 11-8/pz-n ‘‘On the Particularities of Trading and Recording Rights to Securities Designated for Qualified Investors and Foreign Securities” (‘the ‘Order’). The Order’s provisions apply to foreign securities and foreign financial instruments that are qualified as ‘foreign securities’ in accordance with criteria provided by Russian law and procedures established by FSFM. The Order set out exemptions from the general rules regulating the circulation of non-Russian securities and securities designated for qualified investors. In particular, foreign securities may be acquired by non-qualified investors without brokerage assistance, inter alia, in the following cases:

  • If the securities are acquired by a non-Russian individual (for example, non-Russian citizen working in Russia);
  • If the securities are acquired by Russian nationals:
    • based on the terms of an employment agreement (contract), or
    • in the course of performing duties under an employment agreement (contract), or
    • in the course of performing the duties of a member of the board of directors (supervisory board) of the legal entity, etc.

The Order introduces exemptions, from a securities law perspective, for Plans under which non-Russian shares are offered to individuals in Russia. However, carefully drafting and analyzing documents supporting these plans is advisable in order to decrease the risk of non-compliance with Russian securities law.

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