Resolution 1102
We remind you that by Resolution 1102 the Russian Government defined the scope of information that issuers of securities have the right not to disclose and/or provide to protect against the imposition of foreign restrictive measures against them.According to Resolution 1102, information that is subject to disclosure in accordance with Russian laws on securities and joint stock companies may be disclosed to a limited extent, in particular, by the following companies:
- sanctioned companies;
- companies in the defence industry;
- banks authorised in the area of state defence contracts;
- companies registered or operating in Crimea, Sevastopol or new regions of the Russian Federation, etc.
Essence of clarifications
The Letter provides clarifications on the following issues related to cases of the unjustified closure of access to information by issuers.General approach to the application of Regulation 1102
The Letter confirms that the right to impose restrictions on the disclosure (provision) of information is granted to the issuer provided that disclosure (provision) may lead to the imposition of sanctions by foreign states or organisations against the issuer and/or other persons.
Meanwhile, the risk of foreign sanctions against an issuer that does not fall under the qualification of Resolution 1102 is not a reason for non-disclosure (non-provision) of information. Such grounds do not includeClause 1 of the Letter the existence of a right to the non-disclosure (non-provision) of information of an organisation controlled by the issuer or its controlling person either.
According to the Letter, a different approach, under which non-disclosure occurs in the absence of real sanctions threats only on the basis of the fact that formally Resolution 1102 provides such an opportunity, “does not correspond to the goals of anti-sanctions regulation and leads to a violation of the balance between the exercise of the right to impose restrictions and the rights of investors, shareholders, creditors to information on the issuer.”
The Ministry of Finance and the Bank of Russia also point out other undesirable practices — for example, when an issuer does not disclose information on information resources provided by accredited information agenciesFor example, on the Interfax resource (
Public offering or circulation of securities
When exercising the right to non-disclosure, the issuer should pay special attention to the issue of investors’ awareness of its activities, as well as the risks of negative consequences in case of a significant decrease in the level of information transparency.
According to the Letter, the best practice for an issuer of publicly offered or traded securities to apply Regulation 1102 is not to disclose the most critical information for the sanctions threat, while keeping publicly available information that may affect the investment decision. The LetterClause 2 of the Letter presents examples in which issuers are recommended to comply with this practice: disclosure of information on convening and holding a general meeting of participants (shareholders), decisions of the issuer’s Board of Directors, reorganisation or liquidation of a person securing the issuer’s obligations under bonds, etc.
Examples of incorrect restriction of information disclosure
The Letter lists the following cases of the incorrect (unreasonable) exercise of the right to non-disclosure (non-provision) of information, which were singled out by the Ministry of Finance and the Bank of Russia as part of their analysis:
- restriction of the disclosure (provision) of information that does not contain details allowing one to identify a particular person (for example, the text does not mention the surname, first name, patronymic, name of a legal entity, other identifying characteristics);
- restriction of the disclosure (provision) of information on a transaction being performed that does not contain its detailed description (for example, there is no information on the date of the transaction, its parties and beneficiaries, the category of the transaction, its type, subject matter, amount and other conditions);
- restriction by the issuer engaged in defence and/or strategic activities of the disclosure (provision) of information that is not stipulated by Resolution 1102 (information reflecting consolidated results (totals) from the issuer’s activities; information on the issuer’s financial and economic activities);
- restriction by the issuer of the disclosure (provision) of information that does not contain details allowing one to establish that the issuer operates in the territories of Crimea, Sevastopol and new regions of the Russian Federation;
- restriction by the issuer of the disclosure (provision) of information related to its securities (in particular, on the nominal value; on accrued and/or paid income, on non-fulfilment of the issuer’s obligations on securities);
- restriction by the issuer of the disclosure (provision) of information on risks not directly related to the issuer or that does not allow one to make an unambiguous conclusion as to whether this risk, if realised, may have a significant impact on the issuer’s financial and economic activities and financial position;
- restriction by the issuer of the disclosure (provision) of information containing aggregate (summary) indicators related to the issuer’s activities, indicating their size and general description without detailed data on the basis of which such indicators were calculated (obtained), including information on charter (share) capital, cash and cash equivalents, profit, revenue, debt, taxes;
- restriction by the issuer of the disclosure (provision) of information in respect of investments, which, taking into account the laws of the Russian Federation on accounting, are not classified as financial investments (e.g., in immovable property, precious metals, jewellery, etc.);
- restriction by the issuer of the disclosure (provision) of information containing information that is of an open or general informative nature;
- restriction by the issuer of the disclosure (provision) of information, the obligation to disclose and/or provide which is not established by the laws of the Russian Federation on securities and joint stock companies.
In order to unify the issuers’ disclosure practices, the annexes to the Letter contain (i) examples of information the disclosure (provision) of which may not be restricted, (ii) a list of information that issuers may not disclose (provide), and (iii) examples of the correct (reasonable) restriction of disclosure (provision) of information.
Significance of the Clarifications
The incorrect application of the provisions of Resolution 1102 only aggravated the situation of investors and negatively affected the investment attractiveness of Russian issuers. The publication of such clarifications is definitely a step in the right direction towards improving the efficiency of the Russian stock market. In addition, the demonstration by the Ministry of Finance and the Bank of Russia of clear examples of the restricted disclosure of information will help lead issuers to a uniform disclosure practice with the least damage to investors.Based on the analysis of the Letter’s provisions, we see that the clarifications of the Ministry of Finance and the Bank of Russia are rather recommendatory in nature. If the disclosure of information, in the issuer’s own opinion, actually creates a risk of sanctions restrictions being imposed on the issuer, its management bodies or other relevant persons, non-disclosure of such information (even in the examples discussed in the Letter) is permissible and would be in line with the objectives of Resolution 1102. Therefore, the Letter should not be viewed as requiring full disclosure in any case in the examples considered. Taking into account that one of the primary objectives of the Letter is to prevent issuer abuse, it is important for issuers to restrict disclosure only to the extent necessary to mitigate the risk of foreign sanctions.
We will keep an eye on the emerging practice of issuers’ disclosure of information, taking into account the new clarifications, as well as subsequent measures taken by the Ministry of Finance and the Bank of Russia.