New Limits on International Securities Offerings by Russian Issuers

The Russian securities regulatory body (a/k/a FSFR, Russian: Федеральная служба по финансовым рынкам) issued an executive order on June 5th, 2008 updating the existing restrictions for Russian issuers regarding placement of equity securities outside of Russia. The rules also apply to offerings of depositary receipts. They are effective as of July 24, 2008.

Per the updated rules, any Russian issuer can have no more than 30% of its equity securities offered on non-Russian markets. More importantly, certain industries are deemed "strategic" and issuers operating in such industries are subject to even stricter limitations. Companies that develop natural resources of national significance (which would presumably include all oil & natural gas producers) can have no more than 5% of their authorized capital offered overseas. Issuers in other strategic industries are subject to a higher, but nonetheless restrictive limitation of 25%. The definition of "strategic" given by FSFR is rather expansive and could be interpreted to cover a number of less important businesses.

Time will show how the FSFR will approach the enforcement of its new rules.

For the complete text of the amended rules (in Russian), search under “Положение о порядке выдачи ФСФР разрешения на размещение и (или) обращение эмиссионных ценных бумаг российских эмитентов за пределами Российской Федерации” .