Companies and regulators grapple with fallout from sanctions amid promises of divestment
At the same time, regulators are advising financial firms – including brokerage firms, asset managers, crypto platforms and others – that they must adhere to sweeping economic sanctions against Russia.
In a statement on Monday, the Canadian Securities Administrators (CSA) said all market participants – including listed companies, financial market infrastructure firms and issuers – are potentially impacted by the economic sanctions imposed. by the federal government against Russia. Regulators have called on companies to carry out their own due diligence (and consider obtaining expert advice) to ensure they comply with their obligations under the sanctions.
The CSA said companies could be directly affected by the sanctions if they deal with Russian citizens or entities (including their assets and property) that are specifically named in the sanctions. Companies in the financial sector could also be affected by engaging in transactions that may facilitate violations of the restrictions.
Along with prohibitions on direct relationships with sanctions targets, the CSA stressed that “causing, facilitating or aiding prohibited activities” is prohibited.
Additionally, companies are expected to determine, on an ongoing basis, whether they are in possession of assets owned or controlled on behalf of sanctions targets.
At the same time, regulators have acknowledged that companies’ obligations under sanctions may conflict with their promises to divest from Russia.
The UK’s Financial Conduct Authority (FCA) reported that many asset managers and pension fund managers had already reduced their Russian holdings to zero and announced their intention to divest as much as possible. But he also acknowledged that there are “significant practical challenges” to the divestment of Russian assets.
To that end, the FCA has issued guidance on how companies are expected to meet their obligations under economic sanctions.
Additionally, Britain’s Chancellor of the Exchequer, Rishi Sunak, said his government recognizes that divestment could be “a long-term process, given market conditions and the ability to sell assets due to sanctions. world”.
However, he pointed out that commitments by major energy and financial companies, including fund giant Vanguard, to sell Russian stakes and end all new investment in the country sent a strong signal to the Russian regime, and that the government would support companies wishing to divest. .
“We must collectively go further in our mission to inflict maximum economic suffering – and to stop further bloodshed,” he said in a statement.
British government officials met with asset managers and institutional investors last week to discuss investments in Russia, he said, and “welcomed the consensus on the need to economically isolate Putin and his diet”.
Sunak also stressed that “there is no need for new investments in Russia.”
Elsewhere in Europe, the European Securities and Markets Authority (ESMA) said it was “closely monitoring” the impact of the conflict on financial markets.
ESMA also called on financial firms to enforce sanctions and issuers to ensure that any material information about the impact of the crisis is properly disclosed to markets.