Nominal securities holders going live in Ukraine

On 24 November 2018, the law establishing the institute of nominal securities holders in Ukraine became effective. The respective changes to the regulation of the Ukrainian depositary system were introduced by the Law of Ukraine “On Amendments to Certain Laws on Stimulation of Foreign Investment” dated 15 May 2018 with the aim facilitating access for foreign depositary institutions to the Ukrainian securities market and depositary system.

From now on depositary institutions / custodians registered in one of the EU/FATF member states and authorised in their own jurisdiction to provide services of securities custody and registration, are entitled to open securities accounts of nominal securities holders with Ukrainian depositary institutions for the purpose of holding securities of their clients (or clients of their clients).

Previously, such approach was not possible due to the Ukrainian statutory rule that an owner (holder) of a securities account (e.g. a foreign depositary institution) was to be considered the owner of securities held in its securities account opened with a Ukrainian depositary institution (e.g. a client of the foreign depositary institution could not exercise its corporate rights directly and such securities would be treated as assets of the foreign depositary institution for the purposes of any enforcement).

Under the new regime, a nominal securities holder is no longer considered the owner of securities held in its account in Ukraine: title to the respective securities, as well as any rights or encumbrances in respect of them, shall be confirmed by records from the securities accounts of such nominal holder’s clients (clients of their clients) within the accounting system of such nominal holder. For that purpose a document issued by the nominal securities holder under the laws of its jurisdiction shall be deemed sufficient documentary evidence of title to the respective securities at a certain moment.

Detailed rules for opening securities accounts of nominal securities holders, carrying out depositary transactions in such accounts, and relationships between nominal securities holders and Ukrainian depositary institutions will be developed by the National Securities Commission of Ukraine in due course.

Please contact Nazar Chernyavsky or Iryna Bakina for further information.