Safe Custody of Financial Instruments

For ensuring safe custody of financial instruments, rendering of related services, and execution of transactions, ABLV Bank, AS (hereinafter referred to as the Bank) uses services provided by other agency companies, including correspondent banks, exchanges, depositories, clearing houses and other financial market institutions (hereinafter referred to as Agency Companies).

Financial instruments of the clients are held by the Bank with the Agency Companies registered in both the European Union member states and other states (the Russian Federation, the Republic of Belarus, the Swiss Confederation, and the United States of America).

Financial instruments that belong to customer are held in a nominee account with an Agency Company, which is opened in the name of the Bank (hereinafter referred to as Nominee Account), and it is indicated that those financial instruments belong to the Bank’s customers. Financial instruments that belong to several customers of the Bank are held in one Nominee Account.

The Bank may hold financial instruments that belong to customers with Agency Companies registered abroad also in cases where custody of financial instruments in the Nominee Account for the benefit of third parties is not regulated in those countries, in case it is necessary for executing financial instruments transaction requested by the customer.

The Bank keeps records of customers’ financial instruments under custody and ensures that:

  1. at any time it is possible to separate financial instruments that belong to one customer from financial instruments that belong to another customers or the Bank;
  2. records are regularly reconciled with financial instruments’ records kept by the Agency Company which the Bank holds customers’ financial instruments with.

Safe Custody of Financial Instruments in Individual Segregated Account with Central Securities Depositories

Custody of the clients’ financial instruments, services and transactions under those are ensured by the bank using the services of different agency companies, including central securities depositories. The clients are offered to hold their financial instruments in Nominee Account or Individual Segregated Account with central securities depositories.

The bank’s clients possess legal ownership right to the financial instruments regardless the way the financial instruments are held with central securities depositories on behalf of the clients.

Сhoosing an Individual Segregated Account, the client has the ownership right to all financial instruments held in the client’s Individual Segregated Account. Whereas in case of Nominee Account, in which all clients’ financial instruments are held together, the client has the ownership right to a part of the financial instruments in the account that is directly proportionate to the number of the client’s financial instruments in relation to the total number of the financial instruments in this account.

There is the risk of the lack of financial instruments in the account due to default on obligations of the counterparties, administrative errors, or other extraordinary circumstances. The procedure for returning the client’s financial instruments depends on the account choice by the client. If the client opts for Individual Segregated Account, the lack of financial instruments only concerns the client who is the owner of this account. Whereas in case of Nominee Account used, the lack of financial instruments is proportionally divided between the clients holding the same type of financial instruments in Nominee Account, which means the lack of financial instruments can also affect the client where the financial instruments are lost because of circumstances not related to this particular client.

Moreover, disclosure of the client information to the central securities depository differs depending on the client’s choice of account. In case of Individual Segregated Account, central securities depository is supplied with any information about the client requested by the depository, whereas in case of Nominee Account the information about the client is provided to the central securities depository on the instances stipulated by law only.

Russian Issuers Financial Instruments Custody

Under rendering investment services, ABLV Bank, AS adheres to the requirements set forth in normative acts regarding the procedures of providing investment services, including the requirements for holding the financial instruments belonging to customers separately from the financial instruments belonging to ABLV Bank, AS, where custody is ensured by agency companies registered abroad, provided the legal acts of the respective country allow opening nominee accounts for non-residents. Separate holding of financial instruments is completely ensured in the Russian Federation.

Separate holding of financial instruments ensures several benefits: assets are held more securely, tax rates are applied correctly, and respective corporate event service is provided. To enable those benefits, normative acts of the Russian Federation contain provisions on supplying issuers of financial instruments and agency companies with the information on securities holders. This requirement also applies to holders of depositary receipts of foreign issuers certifying the rights to securities of Russian issuers.

For decreased tax rate to be applied to income from financial instruments, provided by the tax conventions concluded between the country of customer’s tax residence and the Russian Federation, customers of ABLV Bank, AS who use investment services need to submit a confirmation of their tax residence, issued by tax authorities of the respective country, to ABLV Bank, AS.

This is also to inform that ABLV Bank, AS shall not be deemed a tax agent, this notice is for information only and does not constitute tax advice.

The Bank has taken adequate steps to ascertain that pursuant to the laws of the jurisdictions of the Agency Companies the client’s financial instruments held with the Agency Company are not to be included in the company’s property securing the creditors’ claims in case of insolvency of the Agency Company. Detailed information about the risks associated with the Agency Companies is provided in ABLV Bank, AS General Terms of Business.