On 19/01/2024, it was confirmed that a significant portfolio of securities of Russian issuers previously deposited in the owner’s account with one of the Swiss banks was credited to the brokerage account of a large investor — client of “LINNIKOV & PARTNERS”.
Switzerland joined the EU and US sanctions regimes in the spring of 2022, which led to restrictions on the right of Russian investors to dispose of their property. Thus, L&P client stopped receiving due payments on his securities, as well as could not sell or transfer them to third parties. In other words, the brokerage account was blocked with no legal grounds. The only way out of this situation was to transfer the securities to the client’s account opened with a Russian broker.
The L&P sanctions law team faced the task of transferring the client’s securities into the “Russian perimeter” in order to reinstate the owner’s right to dispose of his property and receive coupon and other payments.
“Despite the fact that each case of blocking of foreign accounts of Russian clients, not legally designated for any sanctions, is unique, we have developed a certain algorithm that allows us to successfully accomplish transfers of assets of our clients to Russia,” — says the founder of L&P Alexander Linnikov.
First, it is necessary to make sure that the client has valid accounts in Russia or other so-called “friendly” jurisdictions, and in case there are no such accounts, open them with a credit institution or broker that does not fall under sanctions and is also acceptable for the foreign broker who is transferring assets.
Further, given the excessive duration and complexity of compliance procedures, it is necessary to prepare in advance and forward to the receiving and transmitting financial institutions a set of documents confirming the origin of the funds, as well as the legality of their original purchase.
Third, sometimes difficulties with foreign brokers arise out of their attempts to unreasonably delay transfer of securities or even deny such transfers without sufficient legal grounds. That is why, in some cases, it is necessary to address claims to such brokers with assistance from Swiss or EU attorneys. In most cases properly motivated pre-trial claims, detailing a clear and present risk of liability for the value of assets, as well as substantial amounts of damages and expenses of the client, quickly help to overcome reluctance of foreign financials institutions and ensure the transfer of securities to Russia.
Finally, in some cases, after a successful transfer of securities, Russian brokers credit them to special segregated accounts (that is, practically blocks them again) in order to make sure that the securities were not purchased from residents of so-called “hostile” states after March 2022. Only upon presentation of proper evidence that the securities were purchased by the current owner before the introduction of restrictive measures, these assets are credited to a regular brokerage account, which can be considered a successful completion of the transfer of securities to Russia.