One of the new features is the amendment of article 5f, paragraph 1, of Council Regulation (EU)
Article 5f, paragraph 1 of Regulation 833:
“It shall be prohibited [for EU Persons] to sell transferable securities denominated in any official currency of a Member State issued after 12 April 2022, or denominated in any other currency issued after 6 August 2023, or units in collective investment undertakings providing exposure to such securities, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia.”
Therefore, the amendments cover the sales of transferable securities and units in collective investment undertakings providing exposure to such securities (1) denominated in a currency other than the currency of an EU member state (such as the US dollar or pound sterling) and (2) issued after 6 August 2023.
Transferable securities mean the following classes of securities, including in the form of crypto-assets, which are negotiable on the capital market, with the exception of instruments of payment:
- shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares;
- bonds or other forms of securitised debt, including depositary receipts in respect of such securities; and
- any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities.
Relevance of the Prohibition
Please note that the Prohibition does not apply to securities issued before 12 April 2022 (in relation to securities denominated in the currency of an EU member state) or 6 August 2023 (in relation to securities denominated in any other currency).Importantly, the Prohibition applies only to the sales of securities in question. However, we cannot rule out an expansive interpretation of “sale” to include other forms of transfer. The EU only explicitly states European Commission's Consolidated FAQs on the implementation of Council Regulation
Even before the 11th package was introduced, there had been questions about who was targeted by the Prohibition. In this connection, we will consider the main categories of such persons below.
Citizens/residents of the EU, EEA and Switzerland residing in Russia
Article 5f, paragraph 2 of Regulation 833 expressly states that the Prohibition does not apply to nationals of EU Member States, the European Economic Area (“EEA”) or natural persons having a temporary or permanent residence permit in the EU, EEA or Switzerland, including if they reside in Russia.Subsidiaries and branches of Russian legal entities
The Prohibition does not apply to subsidiaries established in the EU owned by legal persons, entities or bodies established in Russia. However, such subsidiary may not be used to circumvent the Prohibition and sell such securities to a Russian person.Branches/representative offices of Russian legal persons in the EU fall under the ProhibitionEU FAQs, page 51.
Entities owned by Russian nationals or natural persons residing in Russia
Strictly speaking, the Prohibition does not apply to entities owned by Russian nationals or natural persons residing in Russia if such entities are established in third countries.However, the Prohibition should be read in conjunction with article 12 of Regulation No. 833, which prohibits participating, knowingly and intentionally, in activities where the object or effect of which is to circumvent the prohibitions referred to in Regulation No 833. Therefore, EU Persons should exercise enhanced due diligence to ensure that they are not selling securities to an entity owned by a Russian national or a natural person residing in RussiaEU FAQs, page 82.
