In light of recent geopolitical developments, many investors are faced with the challenge of converting their Russian ADRs and GDRs into local shares. This guide aims to provide you with a comprehensive overview of the conversion process, focusing on the role of a prominent European brokerage, Freedom24. We'll cover the issues with Russian ADRs, the conversion procedure, key information about Freedom24, and the Russian ADRs that can be converted.
The Challenge with Russian ADRs and GDRs
Following the events in Ukraine, the Russian government decided to delist firms registered in Russia from foreign exchanges, which includes Russian ADRs and GDRs. This has left investors in a precarious position, wondering how to convert or transfer these assets into valid local stocks.
One of the significant challenges investors face is finding a way to convert Russian ADRs and GDRs, especially as Russian law traditionally required a Russian custodial account for this process. However, there is a solution in the form of certain non-Russian brokerage accounts, and Freedom24 is a prime example.
How to Exchange Your Russian ADRs and GDRs
Freedom24 offers a clear and straightforward procedure for converting your Russian ADRs and GDRs into local shares. Here are the steps to follow:
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Account Setup: Begin by opening an account with Freedom24. You will need to provide essential personal information, including an identity card or passport, proof of address (e.g., a bank statement or utility bill), a selfie, a basic financial profile, and your taxpayer identification number.
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Transfer of Securities: Initiate the transfer of your securities by emailing the list of securities along with their ISINs (international securities identification codes) to Freedom24 at info@freedomfinance.eu.
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Income Information: Depending on the type of securities you hold, you may be required to provide additional income information at the request of the broker.
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Deposit Assets: Follow the instructions provided by Freedom24 to deposit your assets. This step is crucial for the conversion process.
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Outgoing Transfer: Submit an outgoing transfer order from your current bank or broker, which holds your Russian ADRs or GDRs, in favor of Freedom24.
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Conversion: Finally, convert the newly received ADRs or GDRs into local Russian stocks following the broker’s instructions. The conversion deadline is set at December 23rd, with variations depending on the specific Russian ADR.
It's important to note that not all brokers can facilitate the conversion of Russian ADRs and GDRs. Furthermore, the conversion process no longer requires a Russian broker or custodian. The deadline for converting ADRs or GDRs to local shares is until June 30, 2023.
Freedom24: Your Trusted Partner in Conversion
Freedom24 is a well-established European brokerage with a strong track record. Here are some key details about this brokerage:
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Conversion Fee: Freedom24 charges a conversion fee of 3% of the local share value, with a minimum fee of $50.
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Product Offering: Freedom24 provides access to a wide range of financial products, including stocks, ETFs, bonds, futures, and options.
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Minimum Deposit: You can start with a minimum deposit of €/$0.
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Regulation: Freedom24 is regulated by CySEC, BaFin, and SEC.
With over 370,000 clients worldwide and a Trustpilot rating of 4.7 out of 5, Freedom24 is a reputable choice for investors seeking to convert their Russian ADRs and GDRs. The platform offers competitive pricing and access to international markets, including NASDAQ, NYSE, CME, HKEX, LSE, Deutsche Börse, and KASE.
Russian ADRs Eligible for Conversion
Below is a list of major Russian ADRs that can be converted into regular shares using Freedom24:
- Magnit PJSC ADR (Ticker: MGNT)
- Mobile Telesystems PJSC ADR (Ticker: MBT)
- Rosneft PJSC GDR (Ticker: ROSN)
- Novorossiysk Commercial Sea Port GDR (Ticker: NMTP)
- Cherkizovo Group PJSC GDR (Ticker: GCHE)
- PIK Group PJSC GDR (Ticker: PIKK)
- Inter RAO UES PJSC GDR (Ticker: IRAO)
- Rosseti PJSC GDR (Ticker: MRKH)
It's worth noting that Gazprom ADRs can no longer be converted to local shares as Gazprom discontinued its ADR program in February 2023.
The Bottom Line
As the deadline for converting Russian ADRs and GDRs into local shares approaches on June 30, 2023, investors should carefully consider their options. Delisting of Russian ADRs on foreign exchanges and the cessation of depository programs mean that failure to convert by the deadline could lead to a loss of capital. It's essential to act promptly and seek guidance from a trusted brokerage like Freedom24.
Please keep in mind that all investments involve risk, and it's crucial to conduct your own analysis and seek advice from certified professionals if needed. The decision to convert your Russian ADRs and GDRs is a significant one, and it's essential to make an informed choice.
Frequently Asked Questions
Who is eligible to request a conversion?
Anyone who can open an account with Freedom24 and provide the necessary security details as per their instructions is eligible to request a conversion.
What is the usual timeframe for the conversion process?
The timeframe can vary based on Freedom24's workload and how quickly you provide the required security details. In general, most security transfers take 2-3 weeks, but each transfer is unique.
What is the deadline to convert Russian ADRs to ordinary shares?
The deadline for conversion is June 30, and it may vary depending on the specific Russian ADR. Starting the conversion process as soon as possible is advisable.
Why is it important to convert Russian ADRs and GDRs?
Failure to convert these securities by the deadline will result in their expiration, leading to a loss of capital. Converting to local shares ensures that you retain ownership of these assets.
Can I sell the received stock immediately after converting?
No, the converted stock cannot be sold immediately, as it is held in Russia's national depositary. Sales will be possible once the sanctions are lifted from the national depositary.
