1. Mail
From : Detlef Heinzel < [email protected] >
Sent: Thursday, April 25, 2024 6:15 PM
To: DR Russia Inquiries < [email protected] >; GER-BSK-Corp-Comm < [email protected] >
Subject: Re: CURRENT STATUS of Opening Books for GAZPROM-ADR (Russian DR Programs)
Gazprom American Depositary Receipts
I represent a group of about 110 very concerned ADR investors in the Telegram groups: "Russian ADR and Consors Damaged IG", who have not yet been able to exchange their Gazprom ADRs. To avoid over 110 individual inquiries to your company, we have collected our comments, findings and questions and presented them as follows:
According to our research, Gazprom's books do not need to remain closed. There are no legal obstacles, nor is it impossible to reconcile the books.
Bundesbank exemption
After approval has been granted by December 25 , 2023, in our legal opinion, the conversion of ADRs / GDRs into original securities is also possible after December 25 , 2023. Conversion of American Depositary Receipts (ADRs) or similar certificates - application in accordance with Article 6b Paragraph 5aa of Regulation (EU) No. 269/2014 |
Deutsche Bundesbank Appendix to the exemption
Appendix Ito the general authorization of the Deutsche Bundesbank of October 9, 2023 on the basis of Article 6b Paragraph 5aa of Regulation (EU) No. 269/2014No. ISIN Name of the security Issuer of the security underlying the share certificate 4 US3682872078 GAZPROM ADR SP RL L Gazprom PJSC 5 US36829G1076 GAZPROM NEFT ADR RL Gazprom Neft PJSC
NSD Regulation
According to the decision of the NSD Board of Directors dated November 6, 2023, the NSD announces the extension of the marketing periods (ie the collection of service fees) for the following services until December 31, 2024:
BNY Mellon Closed Books
What happens to my DRs if they are not converted into shares? At the same time, according to information from The Bank of New York Mellon, the depositary bank (custodian) reserves the right to continue the conversion of depositary receipts even after the mentioned dates . https://adr.gazprom.com/en/qa/
NSD Order
Ref. No. 29766 of December 7, 2023 To NSD customers Pursuant to the decision of the NSD Board of Directors dated November 6, 2023, NSD announces the extension of marketing periods (i.e. charging of service fees) for the following services until December 31, 2024: h ttps://www.nsd.ru/en/publications/news/operational-news/on-extension-of-marketing-periods-for-nsd-depository-services-2023-12-07/
Gazprom ADR's that were exchanged :
The Gazprom Annual Report 2022 does indeed contain data on ADR holders.
After an initial 15.90% ADR holders, 6.63% ADR holders are reported at the end of 2022.
As per Federal Law No. 114-FZ On Amendments to the Federal
Law On Joint Stock Companies and Certain Legislative Acts of the Russian Federation, dated April 16, 2022, listing
of American Depositary Receipts (ADRs) on Gazprom shares was suspended. On April 29, 2022 and May 4, 2022,
the Company submitted instructions to The Bank of New York Mellon to terminate deposit agreements under which
depositary receipts on PJSC Gazprom shares were placed and to close the depositary receipt programs.
To comply with the above law, the Company sent delisting notices to all Russian and foreign marketplaces
where ADRs on PJSC Gazprom shares were listed. Holders of ADRs on PJSC Gazprom shares
as at 27 April 2022 (15.90% of the Company's authorized capital as at the above date) may convert their ADRs into
PJSC Gazprom's ordinary shares under the standard procedure under the Deposit Agreement with The Bank
of New York Mellon subject to mandatory requirements of Russian laws.
Sent: Thursday, April 25, 2024 6:15 PM
To: DR Russia Inquiries < [email protected] >; GER-BSK-Corp-Comm < [email protected] >
Subject: Re: CURRENT STATUS of Opening Books for GAZPROM-ADR (Russian DR Programs)
Gazprom American Depositary Receipts
I represent a group of about 110 very concerned ADR investors in the Telegram groups: "Russian ADR and Consors Damaged IG", who have not yet been able to exchange their Gazprom ADRs. To avoid over 110 individual inquiries to your company, we have collected our comments, findings and questions and presented them as follows:
According to our research, Gazprom's books do not need to remain closed. There are no legal obstacles, nor is it impossible to reconcile the books.
Bundesbank exemption
After approval has been granted by December 25 , 2023, in our legal opinion, the conversion of ADRs / GDRs into original securities is also possible after December 25 , 2023. Conversion of American Depositary Receipts (ADRs) or similar certificates - application in accordance with Article 6b Paragraph 5aa of Regulation (EU) No. 269/2014 |
Deutsche Bundesbank Appendix to the exemption
Appendix Ito the general authorization of the Deutsche Bundesbank of October 9, 2023 on the basis of Article 6b Paragraph 5aa of Regulation (EU) No. 269/2014No. ISIN Name of the security Issuer of the security underlying the share certificate 4 US3682872078 GAZPROM ADR SP RL L Gazprom PJSC 5 US36829G1076 GAZPROM NEFT ADR RL Gazprom Neft PJSC
NSD Regulation
According to the decision of the NSD Board of Directors dated November 6, 2023, the NSD announces the extension of the marketing periods (ie the collection of service fees) for the following services until December 31, 2024:
BNY Mellon Closed Books
What happens to my DRs if they are not converted into shares? At the same time, according to information from The Bank of New York Mellon, the depositary bank (custodian) reserves the right to continue the conversion of depositary receipts even after the mentioned dates . https://adr.gazprom.com/en/qa/
NSD Order
Ref. No. 29766 of December 7, 2023 To NSD customers Pursuant to the decision of the NSD Board of Directors dated November 6, 2023, NSD announces the extension of marketing periods (i.e. charging of service fees) for the following services until December 31, 2024: h ttps://www.nsd.ru/en/publications/news/operational-news/on-extension-of-marketing-periods-for-nsd-depository-services-2023-12-07/
Gazprom ADR's that were exchanged :
The Gazprom Annual Report 2022 does indeed contain data on ADR holders.
After an initial 15.90% ADR holders, 6.63% ADR holders are reported at the end of 2022.
As per Federal Law No. 114-FZ On Amendments to the Federal
Law On Joint Stock Companies and Certain Legislative Acts of the Russian Federation, dated April 16, 2022, listing
of American Depositary Receipts (ADRs) on Gazprom shares was suspended. On April 29, 2022 and May 4, 2022,
the Company submitted instructions to The Bank of New York Mellon to terminate deposit agreements under which
depositary receipts on PJSC Gazprom shares were placed and to close the depositary receipt programs.
To comply with the above law, the Company sent delisting notices to all Russian and foreign marketplaces
where ADRs on PJSC Gazprom shares were listed. Holders of ADRs on PJSC Gazprom shares
as at 27 April 2022 (15.90% of the Company's authorized capital as at the above date) may convert their ADRs into
PJSC Gazprom's ordinary shares under the standard procedure under the Deposit Agreement with The Bank
of New York Mellon subject to mandatory requirements of Russian laws.
If the Russian depository has the exact figures for the ADR holders, how can it be that the ADR issuer does not know the figures? Even if the ADR exchanges were processed via the main depository NSD in Russia, all transactions had to go through the sub-depository, Gazprombank. Even if there were depository transfers to other brokers, Gazprombank had to make the relevant transfers. This means that the business transactions can definitely be reconstructed.
Does the ADR issuer actually have no access to the Russian depositary's books? In the example of Sberbank below, the ADR issuer can very well inspect the depositary's books.
It states " The depositary undertakes to make available at the depositary's headquarters in the United States for inspection by the holders of American Depositary Receipts received from the issuer of the deposited securities, which are made available both (1) by the depositary as the holder of the deposited securities and (2) by the holders of the underlying securities generally by the issuer.
Source: Sberbank registration ". Even if the Russian depositary changes, the possibility and even obligation to inspect the depositary's books is unlikely to change.
Other Reasons for Closed Books: Section 2.9 of the Depositary Agreement
The number of Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of the Pre-Release will generally not exceed thirty percent (30%) of the Shares deposited hereunder; provided, however , that the Depositary reserves the right to change or disregard this limit from time to time in its sole discretion and may change this limit for general purposes with the prior written consent of the Company. The Depositary will also establish dollar limits with respect to Pre-Release Transactions to be entered into hereunder with a particular Pre-Releasee on a case-by-case basis as it deems appropriate. In order to enable the Depositary to meet its obligations to the Holders under the Escrow Agreement, the collateral referred to in clause (b) will be held by the Depositary as security for the performance of the Pre-Release Holder's obligations to the Depositary in connection with a Pre-Release Transaction, including the Pre-Release Holder's obligation to deliver shares or receipts upon termination of a Pre-Release Transaction (and will not, for the avoidance of doubt, constitute deposited securities for the purposes of this Agreement).
https://www.sec.gov/Archives/edgar/data/1358581/000101915506000052/gazpromdep.htm
see also video https://youtu.be/mJS70EZk56I
If the Russian depository has the exact figures for the ADR holders, how can it be that the ADR issuer does not know the figures? Even if the ADR exchanges were processed via the main depository NSD in Russia, all transactions had to go through the sub-depository, Gazprombank. Even if there were depository transfers to other brokers, Gazprombank had to make the relevant transfers. This means that the business transactions can definitely be reconstructed.
Does the ADR issuer actually have no access to the Russian depositary's books? In the example of Sberbank below, the ADR issuer can very well inspect the depositary's books.
It states " The depositary undertakes to make available at the depositary's headquarters in the United States for inspection by the holders of American Depositary Receipts received from the issuer of the deposited securities, which are made available both (1) by the depositary as the holder of the deposited securities and (2) by the holders of the underlying securities generally by the issuer.
Source: Sberbank registration ". Even if the Russian depositary changes, the possibility and even obligation to inspect the depositary's books is unlikely to change.
Other Reasons for Closed Books: Section 2.9 of the Depositary Agreement
The number of Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of the Pre-Release will generally not exceed thirty percent (30%) of the Shares deposited hereunder; provided, however , that the Depositary reserves the right to change or disregard this limit from time to time in its sole discretion and may change this limit for general purposes with the prior written consent of the Company. The Depositary will also establish dollar limits with respect to Pre-Release Transactions to be entered into hereunder with a particular Pre-Releasee on a case-by-case basis as it deems appropriate. In order to enable the Depositary to meet its obligations to the Holders under the Escrow Agreement, the collateral referred to in clause (b) will be held by the Depositary as security for the performance of the Pre-Release Holder's obligations to the Depositary in connection with a Pre-Release Transaction, including the Pre-Release Holder's obligation to deliver shares or receipts upon termination of a Pre-Release Transaction (and will not, for the avoidance of doubt, constitute deposited securities for the purposes of this Agreement).
https://www.sec.gov/Archives/edgar/data/1358581/000101915506000052/gazpromdep.htm
see also video https://youtu.be/mJS70EZk56I
Short Sales
Public Joint Stock Company Gazprom Data on Short
Volume 3,443,700 shares
Source: Public Joint Stock Company Gazprom (OGZPY) Short Interest Ratio and Volume 2024 (marketbeat.com)
Alleged Impact of Naked Short Selling
The SEC is committed to maintaining orderly securities markets. The abusive practice of naked short selling is very different from ordinary short selling, which is a healthy and necessary part of a free market. Our agency's rules are highly supportive of short selling, which can help quickly convey price signals in response to negative information or prospects for a company. Short selling helps prevent "irrational exuberance" and bubbles. But when someone fails to borrow and deliver the securities needed to offset a short position after not even determining that they can be borrowed, that doesn't contribute to an orderly market -- it undermines it. And in the context of a potential "distort and short" campaign targeting an otherwise sound financial institution, this type of manipulative activity can have drastic consequences.
— Speech by SEC Chairman Christopher Cox [
How do ADR shortages come about:
1. Covered short sales
a) no increase in the originally issued ADR program
b) ADR shortages from lending transactions must be balanced out between the counterparties and have no influence on the ADR stocks.
2. Uncovered short sales
a) sale of ADRs that were not even issued by the respective ADR program.
The buyer legally acquires ADRs that come from an uncovered ADR sale. The buyer also acquires the right to conversion with the ADR.
During normal business transactions with ADRs, these are generally never exchanged for original shares. Due to the discontinuation of the DR programs, an exchange of the ADRs for shares is necessary.
Double Dipping
There are brokers who apparently refuse to write off ADRs converted through the Russian method of forced exchange, resulting in an inequality between ADRs and stock holdings. There are probably only a small number of known brokers in this regard.
Public Joint Stock Company Gazprom Data on Short
Volume 3,443,700 shares
Source: Public Joint Stock Company Gazprom (OGZPY) Short Interest Ratio and Volume 2024 (marketbeat.com)
Alleged Impact of Naked Short Selling
The SEC is committed to maintaining orderly securities markets. The abusive practice of naked short selling is very different from ordinary short selling, which is a healthy and necessary part of a free market. Our agency's rules are highly supportive of short selling, which can help quickly convey price signals in response to negative information or prospects for a company. Short selling helps prevent "irrational exuberance" and bubbles. But when someone fails to borrow and deliver the securities needed to offset a short position after not even determining that they can be borrowed, that doesn't contribute to an orderly market -- it undermines it. And in the context of a potential "distort and short" campaign targeting an otherwise sound financial institution, this type of manipulative activity can have drastic consequences.
— Speech by SEC Chairman Christopher Cox [
How do ADR shortages come about:
1. Covered short sales
a) no increase in the originally issued ADR program
b) ADR shortages from lending transactions must be balanced out between the counterparties and have no influence on the ADR stocks.
2. Uncovered short sales
a) sale of ADRs that were not even issued by the respective ADR program.
The buyer legally acquires ADRs that come from an uncovered ADR sale. The buyer also acquires the right to conversion with the ADR.
During normal business transactions with ADRs, these are generally never exchanged for original shares. Due to the discontinuation of the DR programs, an exchange of the ADRs for shares is necessary.
Double Dipping
There are brokers who apparently refuse to write off ADRs converted through the Russian method of forced exchange, resulting in an inequality between ADRs and stock holdings. There are probably only a small number of known brokers in this regard.
Answer
Am Freitag, 26. April 2024 um 13:21:32 MESZ hat DR Russia Inquiries <[email protected]> Folgendes geschrieben:
Dear Detlef Heinzel,
Thanks for your e-mail and for accumulating all questions together.
We would come back to you with answers shortly.
Best Regards,
Sergey Nikitenko
Vice President
The Bank of New York Mellon London Branch
Issuer Services/Depositary Receipt
160 Queen Victoria Street
London EC4V 4LA
United Kingdom
www.bnymellon.com
Authorised to represent The Bank of New York Mellon, and The Bank of New York Mellon, London Branch
The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial
Services and the Federal Reserve and authorized by the Prudential Regulation Authority. The Bank of
New York Mellon, London Branch is subject to regulation by the Financial Conduct Authority and
limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation
by the Prudential Regulation Authority are available from us on request.
Dear Detlef Heinzel,
Thanks for your e-mail and for accumulating all questions together.
We would come back to you with answers shortly.
Best Regards,
Sergey Nikitenko
Vice President
The Bank of New York Mellon London Branch
Issuer Services/Depositary Receipt
160 Queen Victoria Street
London EC4V 4LA
United Kingdom
www.bnymellon.com
Authorised to represent The Bank of New York Mellon, and The Bank of New York Mellon, London Branch
The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial
Services and the Federal Reserve and authorized by the Prudential Regulation Authority. The Bank of
New York Mellon, London Branch is subject to regulation by the Financial Conduct Authority and
limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation
by the Prudential Regulation Authority are available from us on request.
Distribution of sales proceeds
If the books remain closed until further notice, the ADR holder will not be able to receive any allocations in the event of a forced sale of the shares (assuming trading is possible again). If the remaining shares cannot be allocated to the ADRs now, this will not be possible in the future when the proceeds are used. Investors have to fear that the unallocated sales proceeds may be booked by the ADR issuer to collective trust accounts as a "release". In this case, the ADR investor will only get back a fraction of his assets, if at all, because there are significantly more ADRs (not written off ADRs) than shares in circulation.
see video: https://youtu.be/sCbg2_DOh0U
If the books remain closed until further notice, the ADR holder will not be able to receive any allocations in the event of a forced sale of the shares (assuming trading is possible again). If the remaining shares cannot be allocated to the ADRs now, this will not be possible in the future when the proceeds are used. Investors have to fear that the unallocated sales proceeds may be booked by the ADR issuer to collective trust accounts as a "release". In this case, the ADR investor will only get back a fraction of his assets, if at all, because there are significantly more ADRs (not written off ADRs) than shares in circulation.
see video: https://youtu.be/sCbg2_DOh0U
Customers are not responsible for the correct selection of depositories or the custody account bookkeeping. On behalf of the group I represent, I ask you to contact the Russian main depository NSD to reconcile the books. The NSD must be aware that Russian citizens will also be affected by further blockades by the western depositories if the books cannot be reconciled. Furthermore, I would like to ask you to bring about a customer-friendly solution similar to the Citibank action. It is entirely possible for your company to transfer the ADRs held outside the USA to the US depository and exchange the ADRs in Russian depositories for original shares.
For un-reconciled stocks, a conversion could be carried out using a pro-ration factor. There is therefore no reason not to open the books for a new exchange. If the Gazprom books remain closed, the ADR holders of unconverted shares must assume that the mismatch between ADRs and shares is not only due to an alleged non-allocation of ADRs that have not been written off, but possibly also to short naked positions for which the customer is not responsible. This would not only cause serious damage to the reputation of the financial industry but also to the financial product American Depositary Receipts in the foreseeable future.
Kind
regards
2. Mail
To : DR Russia Inquiries < [email protected] >
Sent: Sunday, 23 June 2024 at 08:27:42 CEST
Subject: Re: Subject: CURRENT STATUS of Opening Books for GAZPROM-ADR (Russian DR Programs)
Email dated June 23, 2024 to BNY Mellon
Dear Mr. Sergey Nikitenko,
first of all, I would like to thank you on behalf of many investors. Through your personal commitment, you have made it possible for many investors to exchange their ADRs for original shares.
On April 25, 2024, I wrote to you on behalf of 110 concerned investors who had not yet been able to exchange their ADRs for original shares.
On April 26, 2024, you wrote me an email saying that my letter to your company would be answered shortly. To date, I have not received a response to my letter.
In my letter dated April 25, 2024, I explained to you that, in the opinion of many investors, the books for the Gazprom DR program did not need to be closed at all.
For investors, it is completely incomprehensible that after about 1.5 years, BNYMellon has not managed to clear up the mismatches.
Inquiries from other investors to your company were answered as follows:
"Considering that the opening on conversion depends not on psc gazprom, but on BNY Mellon, in this case this is your operational risk the probability oh which aktuall exists. of course, we are aware of this problem and are trying to solve ist. Follwo our sources: offcial web site, telegram channel, website adr.gazprom. com, we will immediatly notivy the investors."
Translation: "Considering that the opening on conversion depends not on psc gazprom, but on BNY Mellon, in this case this is your operational risk the probability oh which aktuall exists. of course, we are aware of this problem and are trying to solve ist. Follow our sources: official website, telegram channel, website adr.gazprom. com, we will immediately notivy the investors."
At this point I would like to disagree with you. How do you come to the statement regarding the operational risk which the investor has to bear?
First of all, a distinction must be made between different contracts.
First of all, investors have a depository agreement with their broker/bank. The ADRs are held in safekeeping at the broker/bank's depository. If the Russian depository somehow loses shares from the ADR program, the ADR holder has nothing to do with it, as there is no contractual relationship with the foreign depository. The legal structure of the ADR contracts gives the ADR holder the right to convert the ADRs into original shares. Ultimately, the ADR issuer is responsible for the safekeeping, administration and ensuring that the ADRs are exchanged properly for original shares. Again, investors have nothing to do with the selection of the depositories and their custody obligations and therefore bear no operational risk. The operational risk is borne by the Russian depositories and the ADR issuers for the selection of the depository. Could the closure of the books indicate that there were reasons other than a possible double exchange of ADRs via the Russian and European routes??? Have there been naked short sales in the various DR programs, including those of other ADR issuers??? With the result that the ADRs can no longer be exchanged for stock as contractually agreed???
At this point I refer again:
Alleged Effects of Naked Short Selling
The SEC is committed to maintaining orderly securities markets. The abusive practice of naked short selling is very different from ordinary short selling, which is a healthy and necessary part of a free market. Our agency's rules strongly support short selling, which can help quickly convey price signals in response to negative information or prospects for a company. Short selling helps prevent "irrational exuberance" and bubbles. But when someone fails to borrow and deliver the securities needed to offset a short position after not even determining that they can be borrowed, that does not contribute to an orderly market - it undermines it. And in the context of a potential "distortion and short" campaign targeting an otherwise sound financial institution, this type of manipulative activity can have drastic consequences.
— Speech by SEC Chairman Christopher Cox [
I would ask you to respond once again to my questions in the cover letter and not to put off investors any longer. As long as BNY Mellon does not make a clear statement, it can be assumed that some of the ADRs were not backed by shares or that the ADR holdings were diluted by short selling. I could well imagine that some investors will consider taking legal action to enforce their claims.
Kind regards
Best regards Detlef
Sent: Sunday, 23 June 2024 at 08:27:42 CEST
Subject: Re: Subject: CURRENT STATUS of Opening Books for GAZPROM-ADR (Russian DR Programs)
Email dated June 23, 2024 to BNY Mellon
Dear Mr. Sergey Nikitenko,
first of all, I would like to thank you on behalf of many investors. Through your personal commitment, you have made it possible for many investors to exchange their ADRs for original shares.
On April 25, 2024, I wrote to you on behalf of 110 concerned investors who had not yet been able to exchange their ADRs for original shares.
On April 26, 2024, you wrote me an email saying that my letter to your company would be answered shortly. To date, I have not received a response to my letter.
In my letter dated April 25, 2024, I explained to you that, in the opinion of many investors, the books for the Gazprom DR program did not need to be closed at all.
For investors, it is completely incomprehensible that after about 1.5 years, BNYMellon has not managed to clear up the mismatches.
Inquiries from other investors to your company were answered as follows:
"Considering that the opening on conversion depends not on psc gazprom, but on BNY Mellon, in this case this is your operational risk the probability oh which aktuall exists. of course, we are aware of this problem and are trying to solve ist. Follwo our sources: offcial web site, telegram channel, website adr.gazprom. com, we will immediatly notivy the investors."
Translation: "Considering that the opening on conversion depends not on psc gazprom, but on BNY Mellon, in this case this is your operational risk the probability oh which aktuall exists. of course, we are aware of this problem and are trying to solve ist. Follow our sources: official website, telegram channel, website adr.gazprom. com, we will immediately notivy the investors."
At this point I would like to disagree with you. How do you come to the statement regarding the operational risk which the investor has to bear?
First of all, a distinction must be made between different contracts.
- Customer’s deposit agreement with his broker/bank
- ADR contract for orderly exchange of ADR into original shares
First of all, investors have a depository agreement with their broker/bank. The ADRs are held in safekeeping at the broker/bank's depository. If the Russian depository somehow loses shares from the ADR program, the ADR holder has nothing to do with it, as there is no contractual relationship with the foreign depository. The legal structure of the ADR contracts gives the ADR holder the right to convert the ADRs into original shares. Ultimately, the ADR issuer is responsible for the safekeeping, administration and ensuring that the ADRs are exchanged properly for original shares. Again, investors have nothing to do with the selection of the depositories and their custody obligations and therefore bear no operational risk. The operational risk is borne by the Russian depositories and the ADR issuers for the selection of the depository. Could the closure of the books indicate that there were reasons other than a possible double exchange of ADRs via the Russian and European routes??? Have there been naked short sales in the various DR programs, including those of other ADR issuers??? With the result that the ADRs can no longer be exchanged for stock as contractually agreed???
At this point I refer again:
Alleged Effects of Naked Short Selling
The SEC is committed to maintaining orderly securities markets. The abusive practice of naked short selling is very different from ordinary short selling, which is a healthy and necessary part of a free market. Our agency's rules strongly support short selling, which can help quickly convey price signals in response to negative information or prospects for a company. Short selling helps prevent "irrational exuberance" and bubbles. But when someone fails to borrow and deliver the securities needed to offset a short position after not even determining that they can be borrowed, that does not contribute to an orderly market - it undermines it. And in the context of a potential "distortion and short" campaign targeting an otherwise sound financial institution, this type of manipulative activity can have drastic consequences.
— Speech by SEC Chairman Christopher Cox [
I would ask you to respond once again to my questions in the cover letter and not to put off investors any longer. As long as BNY Mellon does not make a clear statement, it can be assumed that some of the ADRs were not backed by shares or that the ADR holdings were diluted by short selling. I could well imagine that some investors will consider taking legal action to enforce their claims.
Kind regards
Best regards Detlef
3. Mail
To : : DR Russia Inquiries < [email protected] >< [email protected] > [email protected]
Subject : Re: CURRENT STATUS of Opening Books for GAZPROM-ADR (Russian DR Programs)
Dear Sir or Madam,
on April 25, 2024, you received an email on behalf of 110 concerned investors who have not yet been able to exchange their ADRs for original shares. Gazprom complaint - ANATOLIEN-PORTAL (anatolienportal.com)
On April 26, 2024, a short email promised that the email inquiry would be answered.
" Dear ..........., Thanks for your e-mail and for accumulating all questions together.
We would come back to you with answers shortly. Email dated April 26, 2024 from BNYMellon".
After you did not respond to the email inquiry, BNYMellon was contacted again on June 23, 2024 with a request. Gazprom complaint 2 - ANATOLIEN-PORTAL (anatolienportal.com)
The two inquiries to your company and the promise to answer the questions and information are public under the above. Homepage pages can be viewed.
As a concerned investor and ADR holder, I now request information on the following queries:
1. Opening of the books
The depository bank The Bank of New York Mellon has currently suspended standard conversion . The depository bank reserves the right to resume the conversion of depository receipts .
Citibank, NA (and Citigroup Global Markets Limited) has, for its part, enabled exchange in the various DR programs (Lokoil, Tatneft, etc.).
Question: Why was BNYMellon unable to resume standard conversion of Gazprom’s DR program in accordance with Citibank’s procedures?
2. Reconciliation of the books
According to research, Gazprom’s books do not need to remain closed. There are no legal obstacles, nor is reconciliation of the books impossible.
The Gazprom Annual Report 2022 does indeed contain data on ADR holders.
After an initial 15.90% ADR holders, 6.63% ADR holders are reported at the end of 2022.
Gazprombank is the Russian depositary for the Gazprom DR program.
"The Depositary undertakes to make available at the Depositary's headquarters in the United States for inspection by the holders of American Depositary Receipts received from the issuer of the deposited securities, which are made available both (1) by the Depositary as the holder of the deposited securities and (2) by the issuer to the holders of the underlying securities generally. Question
: Was inspection of the books possibly neglected?? Were due diligence obligations possibly neglected here????
3.
Approvals for the exchange of the Gazprom DR program
The OFAC had granted approval for the exchange of ADRs until August 13, 2024. The Russian main depository NSD has guaranteed fee-free payment until December 31, 2024. If the Gazprom books had been reconciled in a timely manner, a standard conversion could have been carried out on time by August 13, 2024, because the corresponding approvals from the OFAC and the European Commission were available.
Question: What happens now if OFAC no longer grants approvals for standard conversion???? 4.
Clause 2.9 of the Depositary Agreement
The number of shares that are not deposited but are represented by American Depositary Shares outstanding at any time as a result of the pre-release will generally not exceed thirty percent (30%) of the shares deposited under this Agreement; provided, however,that the depositary reserves the right to change or disregard this limit from time to time at its sole discretion and may change this limit for general purposes with the prior written consent of the Company.
Question: Is there a possibility that BNYMellon did not deposit some of the shares and is no longer able to make a cover purchase due to the trading bans???? Who is responsible for meeting the cover of any shortfall in the ADR contract??
5. Short Selling
Public Joint Stock Company Gazprom Short
Volume Data 3,443,700 shares
Source: Public Joint Stock Company Gazprom (OGZPY) Short Interest Ratio and Volume 2024 (marketbeat.com)
But when someone fails to borrow and deliver the securities required to offset a short position after not even determining that they can be borrowed, that doesn't contribute to an orderly market - it undermines it. And in the context of a possible "distort and short" campaign targeting an otherwise sound financial institution, this type of manipulative activity can have drastic consequences.
— Speech by SEC Chairman Christopher Cox [
Question: How does BNYMellon plan to cover possible short positions???
6. How do ADR shortages come about:
1. Covered short sales
a) no increase in the originally issued ADR program
b) ADR shortages from lending transactions must be balanced out between the counterparties and have no influence on the ADR stocks.
2. Uncovered short sales
a) sale of ADRs that were not even issued through the respective ADR program.
The buyer legally acquires ADRs that come from an uncovered ADR sale. The buyer also acquires the right to conversion with the ADRs.
During normal business transactions with ADRs, these are usually never exchanged for original shares. However, due to the discontinuation of the DR programs, an exchange of the ADRs for shares is necessary.
Conclusion. Are there possibly uncovered short sales in the Gazprom ADR program? A case for the supervisory authorities? Have the supervisory authorities failed???
7. Distribution of possible sales proceeds
If the books remain closed until further notice, the ADR holder will not be able to receive any allocation in the event of a forced sale of the shares (assuming trading is possible again). If the remaining shares cannot be allocated to the ADRs now, this will not be possible in the future when the proceeds are realized. Investors have to fear that the unallocated sales proceeds may be transferred by the ADR issuer to collective trust accounts as a "release". In this case, the ADR investor may only get back a fraction of his assets, if any, since there are significantly more ADRs (unwritten off-books ADRs) than shares in circulation.
see video: https://youtu.be/sCbg2_DOh0U
Question: How will BNYMellon deal with potentially unallocated sales proceeds????
8. Missing shares Operational risk
Statement: "Considering that the opening upon conversion does not depend on PSC Gazprom, but on BNY Mellon, in this case this is your operational risk, that is, the probability that actually exists. Of course, we are aware of this problem and are trying to solve it. Follow our sources: official website, Telegram channel, website adr.gazprom.com, we will notify investors immediately."
The ADR holders do not have a deposit agreement with BNYMellon or its depositary, but only with the domestic broker. If the ADR issuer possibly fails to comply with its supervisory obligations and proper accounting under the deposit agreements with the Russian depositary (here: Gazprombank), this falls within the liability of the ADR issuer or its Russian depositary.
Question : How did the statement regarding the operational risk that the investor has to bear arise? Who is responsible for selecting the depositary, the custody and supervision of the Holdings of the original shares responsible?? The investors??
9. Damage from missing dividends
Less than 14 months remain to claim the dividends for 2022. If the books are not opened by then to complete the necessary exchange for shares, the ADR holders could suffer damage from lost dividends.
Question: How does BNYMellon compensate investors for possible losses from lost dividends???
I hereby urge you to answer my request in the interests of other ADR investors who have not yet been able to exchange their ADRs for original shares. If the previous requests have not been handled by the relevant departments, one would have expected that the requests could have been forwarded internally and answered promptly by the relevant departments in your company. I would like to point out that the lack of transparency and ignorance of the questions put to you so far means that the potentially damaged investors in your company have apparently not received the attention they deserve. The de-registration of supposedly worthless ADRs may be a simple booking process for banks, brokers, funds, etc. For investors, the loss of the investments could lead to a later existential event if investments that are intended for long-term wealth creation or additional retirement provision are no longer worthless. This leads to a loss of trust in both the banking industry and the financial products offered. Could your apparent silence on reasonable inquiries indicate that there are blatant violations of the respective ADR contract due to possible violations of procedural, administrative and supervisory obligations? It is up to you whether, when and in what form you communicate on this. Real losses arise at the latest when the ADR holders are unable to convert into original shares due to the closed books and thus miss out on dividend payments (even retrospectively). This in turn could result in class action lawsuits against your company, which I could possibly join.
Kind
regards
Subject : Re: CURRENT STATUS of Opening Books for GAZPROM-ADR (Russian DR Programs)
Dear Sir or Madam,
on April 25, 2024, you received an email on behalf of 110 concerned investors who have not yet been able to exchange their ADRs for original shares. Gazprom complaint - ANATOLIEN-PORTAL (anatolienportal.com)
On April 26, 2024, a short email promised that the email inquiry would be answered.
" Dear ..........., Thanks for your e-mail and for accumulating all questions together.
We would come back to you with answers shortly. Email dated April 26, 2024 from BNYMellon".
After you did not respond to the email inquiry, BNYMellon was contacted again on June 23, 2024 with a request. Gazprom complaint 2 - ANATOLIEN-PORTAL (anatolienportal.com)
The two inquiries to your company and the promise to answer the questions and information are public under the above. Homepage pages can be viewed.
As a concerned investor and ADR holder, I now request information on the following queries:
1. Opening of the books
The depository bank The Bank of New York Mellon has currently suspended standard conversion . The depository bank reserves the right to resume the conversion of depository receipts .
Citibank, NA (and Citigroup Global Markets Limited) has, for its part, enabled exchange in the various DR programs (Lokoil, Tatneft, etc.).
Question: Why was BNYMellon unable to resume standard conversion of Gazprom’s DR program in accordance with Citibank’s procedures?
2. Reconciliation of the books
According to research, Gazprom’s books do not need to remain closed. There are no legal obstacles, nor is reconciliation of the books impossible.
The Gazprom Annual Report 2022 does indeed contain data on ADR holders.
After an initial 15.90% ADR holders, 6.63% ADR holders are reported at the end of 2022.
Gazprombank is the Russian depositary for the Gazprom DR program.
"The Depositary undertakes to make available at the Depositary's headquarters in the United States for inspection by the holders of American Depositary Receipts received from the issuer of the deposited securities, which are made available both (1) by the Depositary as the holder of the deposited securities and (2) by the issuer to the holders of the underlying securities generally. Question
: Was inspection of the books possibly neglected?? Were due diligence obligations possibly neglected here????
3.
Approvals for the exchange of the Gazprom DR program
The OFAC had granted approval for the exchange of ADRs until August 13, 2024. The Russian main depository NSD has guaranteed fee-free payment until December 31, 2024. If the Gazprom books had been reconciled in a timely manner, a standard conversion could have been carried out on time by August 13, 2024, because the corresponding approvals from the OFAC and the European Commission were available.
Question: What happens now if OFAC no longer grants approvals for standard conversion???? 4.
Clause 2.9 of the Depositary Agreement
The number of shares that are not deposited but are represented by American Depositary Shares outstanding at any time as a result of the pre-release will generally not exceed thirty percent (30%) of the shares deposited under this Agreement; provided, however,that the depositary reserves the right to change or disregard this limit from time to time at its sole discretion and may change this limit for general purposes with the prior written consent of the Company.
Question: Is there a possibility that BNYMellon did not deposit some of the shares and is no longer able to make a cover purchase due to the trading bans???? Who is responsible for meeting the cover of any shortfall in the ADR contract??
5. Short Selling
Public Joint Stock Company Gazprom Short
Volume Data 3,443,700 shares
Source: Public Joint Stock Company Gazprom (OGZPY) Short Interest Ratio and Volume 2024 (marketbeat.com)
But when someone fails to borrow and deliver the securities required to offset a short position after not even determining that they can be borrowed, that doesn't contribute to an orderly market - it undermines it. And in the context of a possible "distort and short" campaign targeting an otherwise sound financial institution, this type of manipulative activity can have drastic consequences.
— Speech by SEC Chairman Christopher Cox [
Question: How does BNYMellon plan to cover possible short positions???
6. How do ADR shortages come about:
1. Covered short sales
a) no increase in the originally issued ADR program
b) ADR shortages from lending transactions must be balanced out between the counterparties and have no influence on the ADR stocks.
2. Uncovered short sales
a) sale of ADRs that were not even issued through the respective ADR program.
The buyer legally acquires ADRs that come from an uncovered ADR sale. The buyer also acquires the right to conversion with the ADRs.
During normal business transactions with ADRs, these are usually never exchanged for original shares. However, due to the discontinuation of the DR programs, an exchange of the ADRs for shares is necessary.
Conclusion. Are there possibly uncovered short sales in the Gazprom ADR program? A case for the supervisory authorities? Have the supervisory authorities failed???
7. Distribution of possible sales proceeds
If the books remain closed until further notice, the ADR holder will not be able to receive any allocation in the event of a forced sale of the shares (assuming trading is possible again). If the remaining shares cannot be allocated to the ADRs now, this will not be possible in the future when the proceeds are realized. Investors have to fear that the unallocated sales proceeds may be transferred by the ADR issuer to collective trust accounts as a "release". In this case, the ADR investor may only get back a fraction of his assets, if any, since there are significantly more ADRs (unwritten off-books ADRs) than shares in circulation.
see video: https://youtu.be/sCbg2_DOh0U
Question: How will BNYMellon deal with potentially unallocated sales proceeds????
8. Missing shares Operational risk
Statement: "Considering that the opening upon conversion does not depend on PSC Gazprom, but on BNY Mellon, in this case this is your operational risk, that is, the probability that actually exists. Of course, we are aware of this problem and are trying to solve it. Follow our sources: official website, Telegram channel, website adr.gazprom.com, we will notify investors immediately."
The ADR holders do not have a deposit agreement with BNYMellon or its depositary, but only with the domestic broker. If the ADR issuer possibly fails to comply with its supervisory obligations and proper accounting under the deposit agreements with the Russian depositary (here: Gazprombank), this falls within the liability of the ADR issuer or its Russian depositary.
Question : How did the statement regarding the operational risk that the investor has to bear arise? Who is responsible for selecting the depositary, the custody and supervision of the Holdings of the original shares responsible?? The investors??
9. Damage from missing dividends
Less than 14 months remain to claim the dividends for 2022. If the books are not opened by then to complete the necessary exchange for shares, the ADR holders could suffer damage from lost dividends.
Question: How does BNYMellon compensate investors for possible losses from lost dividends???
I hereby urge you to answer my request in the interests of other ADR investors who have not yet been able to exchange their ADRs for original shares. If the previous requests have not been handled by the relevant departments, one would have expected that the requests could have been forwarded internally and answered promptly by the relevant departments in your company. I would like to point out that the lack of transparency and ignorance of the questions put to you so far means that the potentially damaged investors in your company have apparently not received the attention they deserve. The de-registration of supposedly worthless ADRs may be a simple booking process for banks, brokers, funds, etc. For investors, the loss of the investments could lead to a later existential event if investments that are intended for long-term wealth creation or additional retirement provision are no longer worthless. This leads to a loss of trust in both the banking industry and the financial products offered. Could your apparent silence on reasonable inquiries indicate that there are blatant violations of the respective ADR contract due to possible violations of procedural, administrative and supervisory obligations? It is up to you whether, when and in what form you communicate on this. Real losses arise at the latest when the ADR holders are unable to convert into original shares due to the closed books and thus miss out on dividend payments (even retrospectively). This in turn could result in class action lawsuits against your company, which I could possibly join.
Kind
regards