On December 22, 2025, the Bank of Russia announced a significant overhaul of its regulations governing the custody of cross-border securities. The proposed amendments, finalized after a public consultation launched in May, represent a pivotal evolution of Russia's financial infrastructure. They aim to sustain market functioning, retain investment appeal, and strengthen the rights of local investors amidst ongoing geopolitical pressure and international sanctions. The new framework focuses on two core areas: the custody of foreign securities in Russia, and the recognition of foreign investors' rights to Russian securities.

1. Maintaining Access: Continued and Simplified Entry for Foreign Securities

Firstly, the regulator explicitly rejected more restrictive options previously considered. The rules confirm that foreign securities will retain direct access to Russia's central securities depository and settlement infrastructure, without being forced into a mandatory Russian Depository Receipt (RDR) structure. This decision prevents a sudden narrowing of market access, preserving a basic level of openness for international diversified assets, which aids Russian investors and financial institutions in managing global portfolios.

Concurrently, the regulator plans to simplify issuance and registration procedures for foreign securities. This move seeks to reduce compliance costs and operational complexity, enhancing market efficiency. It signals Russia's intent to maintain a degree of international connectivity and convenience for its financial market, even within a constrained environment.

2. Risk Transparency: Mandatory Disclosure and Liability Limitation for Custodians

Given recurrent incidents of third-country sanctions, asset freezes, and nationalizations, a cornerstone of the new rules is the introduction of mandatory risk disclosure obligations for custodians. Russian depositaries must explicitly inform their clients of the potential risks associated with holding securities registered through foreign entities or jurisdictions, including possible restrictions or account freezes.

More critically, the Bank of Russia plans to establish a list of exempting circumstances. In events such as sanctions against Russia by the issuer's country or forcible nationalization by a foreign government—deemed "force majeure"—Russian domestic depositaries will be exempt from liability to depositors (investors) for asset losses. This clause effectively allocates geopolitical risk to the end-investor, aiming to shield Russian financial intermediaries from unlimited liability claims arising from cross-border legal conflicts and to bolster the stability of the domestic financial system.

3. Empowering Investors: Segregated Accounts for Russian Securities

Regarding Russian securities held by foreign investors (typically via nominee accounts pooled by international intermediaries), the rules propose a groundbreaking segregated account arrangement. The central bank intends to create conditions allowing the ultimate beneficial owner, under specific circumstances, to request the separation of their ownership rights from a foreign intermediary's omnibus account into an individual, segregated account opened in their own name.

This move seeks to grant asset owners greater control. Theoretically, once segregated, the owner could more freely exercise shareholder rights or dispose of assets without prior dependence on or consent from the foreign intermediary. This addresses the inherent weakening of investor rights in the "nominee holder" model, directly countering the risk of rights being restricted due to an intermediary's compliance with its home country's sanctions.

4. Transparency Reciprocity: Disclosure Requirements and Countermeasures

However, this empowerment is not unconditional. The rules simultaneously reinforce beneficial ownership identification requirements. If stipulated by relevant law or agreement, Russian depositaries remain obligated to disclose information on all ultimate beneficial owners behind an omnibus account upon request. Should a foreign intermediary refuse to provide such information, the Russian regulator may restrict rights (e.g., voting, transfer) associated with the securities in that omnibus account. This stipulation embodies a principle of reciprocity: full rights in the Russian market require meeting Russian transparency demands.

Conclusion: Constructing a Legal Perimeter for "De-risking"

In summary, the Bank of Russia's proposals constitute a systematic attempt to bolster domestic financial sovereignty and investor protection within a context of fragmenting global financial architecture. The policy logic is clear: on one hand, it builds a legal "firewall" for Russia's financial system via risk disclosure and liability limitation, insulating it from the direct impact of external sanctions; on the other, it enhances control for genuine investors (particularly from friendly or neutral jurisdictions) over their Russian assets through segregated accounts, to maintain market attractiveness.

If implemented, these changes will reshape the operational norms and risk allocation framework for cross-border securities custody in Russia. For international investors and intermediaries, a deep understanding of the new boundaries of rights, risk attribution, and compliance requirements will become an indispensable prerequisite for effective risk management and decision-making in this market. This marks Russia's accelerated development of a distinct regulatory framework adapted to a "parallel system."