An attempt to launch bankruptcy proceedings for St. Petersburg Exchange caused a scandal in the market
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Most market participants and experts consider the attempt by an unknown applicant to initiate bankruptcy of the St. Petersburg Exchange as a provocation designed to destabilize the situation around the site and draw attention to it. The Central Bank promises to check the situation for manipulation. Lawyers emphasize that anyone could submit an application on behalf of the exchange, and the court was obliged to register it, even if it was simply then returned without consideration. As RIA Novosti reported in the evening with reference to the court’s press service, this has already happened. Meanwhile, the exchange lost, taking into account the evening correction, almost 10% of its capitalization.
As follows from card indexes arbitration cases, November 24, the Moscow Arbitration Court registered a bankruptcy application for PJSC SPB Exchange. The applicant is not identified; based on the design of the case file, it could be assumed that the initiator was the exchange itself. However, they assured that they did not submit an application, and the site has “a stable financial condition, there are no signs of bankruptcy.” The PJSC promises to “soon contact law enforcement agencies and initiate an investigation into the case of unlawful filing of an application.”
That’s the whole sensation
Lawyer of the bankruptcy practice “Lemchik, Krupsky and Partners” Lyudmila Belobragina initially admitted the possibility of a technical error, since “the card index sometimes displays incorrect information.” But in reality everything turned out to be more interesting.
In the evening, the Moscow Arbitration Court officially informed RIA Novosti that the exchange’s application for bankruptcy was received through the office and returned by a ruling dated November 27. This information is not yet reflected in the file of arbitration cases. Partner at Rustam Kurmaev and Partners, Dmitry Kletochkin, suggested that “someone simply threw a bankruptcy application” into the court’s mailbox: “To determine whether it is proper or not, the application must be registered and handed over to the judge, and when registered, the document automatically ends up into a publicly accessible information system. This is clearly what they wanted to achieve, and this is the whole sensation.”
Advisor to the Dispute Resolution and Bankruptcy Practice of BGP Litigation Ruslan Petruchak admits that the application could have been submitted in person through the office, since “the couriers’ credentials are not checked, only the credentials of the signatory of the application are checked, and this happens later.”
Thus, anyone could file for bankruptcy on behalf of the exchange itself, lawyers say.
According to the source “Interfax”, the reason for returning the application was that “the pre-trial procedure was not followed.” “This does not mean that the document was signed by an unauthorized person, but only means that the notification condition was not met,” clarifies Mr. Kletochkin.
According to the rules, at least 15 calendar days before going to court for bankruptcy, an organization must publish a notice of such intention in the EFRSB in order to notify creditors. But the message was not published. Mr. Petruchak notes that a similar notification procedure through the EFRSB also applies to creditors who want to initiate bankruptcy of a debtor.
Without notification, the court will not accept an application from either the debtor or the creditor, Ms. Belobragina clarifies: “Most likely, this was a deliberate inaction (non-publication of a notice in the EFRSB) in order to hide information about the applicant or so that the court would not accept the bankruptcy application.”
At the same time, Lyudmila Belobragina finds it strange that representatives of the exchange did not immediately take any action within the framework of the process, while a certain Konstantin Vyacheslavovich Smirnov had already submitted an application to familiarize himself with the case materials. On November 24, his full namesake also filed a claim for the recovery of 0.57 million rubles. losses from BKS Company LLC, the exchange was involved as a co-defendant. But the bankruptcy of the exchange at the initiative of the creditor is possible if the latter settles the debt (this is not required only by banks) and, again, publishes a notice in advance, lawyers clarify.
The situation should not affect other creditors of the exchange, believes Lyudmila Belobragina: “As long as the likelihood of introducing a bankruptcy procedure is minimal, large creditors understand this and will not react unless the court accepts it for proceedings and sets a date for the hearing, which did not happen in this case.” .
Panic and manipulation
According to experts interviewed by Kommersant, the mere inclusion of the St. Petersburg Exchange on November 2 in the US SDN-list should not have caused serious financial problems and created preconditions for bankruptcy (the platform suspended trading on November 2 at 18:00 and announced that settlements with investors will begin on November 17, but the process has been delayed).
“Last week we discussed with the exchange the completion of settlements for transactions made at the beginning of the month, about further actions, and here it is. But internal and external lawyers and the exchange itself assure that there is no talk of bankruptcy,” says a Kommersant source in the market. “Given the news background around the stock exchange, investor nervousness has increased; the message caused a strong reaction, from which someone could profit. It’s very similar to manipulation,” says a source in the Russian Criminal Code.
22 billion rubles.
was the capital of the St. Petersburg Exchange based on the results of the second quarter of 2023
The result of the dissemination of news that the Moscow Arbitration Court registered the St. Petersburg Exchange’s application for its own bankruptcy resulted in a negative market reaction. Within a few minutes after the first messages appeared, the stock exchange shares collapsed on the Moscow Exchange by almost 30% and at 10:20 reached 63.8 rubles, the minimum for the entire period of their trading since October 2021. The trading volume for ten minutes ending at 10:20 was 278.9 million rubles, which is almost double Friday’s result.
But the fall did not last long; by 10:30 the shares had recovered most of the decline and returned to the level of 90.8 rubles.
The rise occurred against the backdrop of doubled activity (RUB 524 million). At the end of the trading session, quotes stopped at 89.5 rubles, which is 8.8% lower than the closing values of the previous day.
The current problems of the St. Petersburg Exchange create preconditions for manipulation of its shares due to their increased volatility, notes Arikapital investment strategist Sergei Suverov. Independent financial analyst Andrei Barkhota is convinced that the bankruptcy information was “financial manipulation.”
Lawyers are also inclined to this version, emphasizing that there are special rules in the insolvency law for the bankruptcy of specialized financial organizations. Thus, if there are signs of bankruptcy, the exchange must first contact the regulator, approve and send to the control body a plan for restoring solvency, says Ruslan Petruchak.
If the plan does not succeed, the control body will appoint a temporary administration, which in the future may apply for bankruptcy of the exchange, Mr. Petruchak clarifies, but so far there has been no information about this. He also admits that the purpose of the statement is “to create panic among investors to buy securities at the lowest price.”
According to Mr. Barhota, there may be several interested parties in the scandal around the stock exchange, besides speculators: “The first version is that the initiators are investors who are tired of waiting for compensation for losses after the introduction of sanctions. The second is that the exchange itself decided to raise rates so that the Bank of Russia would help resolve its financial problems. The third version is an information attack by third parties in order to discredit the Central Bank, which for a year and a half was unable to ensure the resistance of financial institutions after the imposition of sanctions.”
Bankruptcy doesn’t matter
The Central Bank promises to analyze the situation, including the actions of market participants with the securities of PJSC St. Petersburg Exchange, “from the point of view of a possible violation of the requirements of the law on countering the use of insider information and market manipulation.”
In the meantime, the exchange continues to resolve problems caused by American sanctions. Nowadays, the site spends a lot of time and effort on tedious compliance procedures, notes Mr. Suverov. Despite this, the expert clarified, the exchange has already made settlements with brokers for transactions dated November 1 and 2. He expects that today or tomorrow the site will complete the assessment of assets that are not subject to restrictions and will return access to them for brokers, and they, in turn, will be able to pay off investors.
According to Kommersant’s sources, on November 27, a meeting was held between the management of the exchange and professional market participants, actions for further unblocking of securities and funds from foreign counterparties were discussed (securities worth $3.37 billion and $140 million in funds were blocked there).
As Kommersant’s source in the market notes, “it was a planned meeting, they spent a couple of minutes on the bankruptcy issue, since they are not going to go bankrupt.”
During the meeting, a schedule was presented: by December 1, the exchange plans to receive opinions from international lawyers, which will describe several scenarios for unlocking assets, then inform clients and formalize the process of withdrawing funds.
Regarding the issue of compliance with the rights of investors in the event of bankruptcy of the exchange, the regulator noted that their funds are placed in the account of another legal entity – the central counterparty (clearing account). By law, property held in a clearing account is not included in the bankruptcy estate. “Thus, investors do not bear the risk of foreclosure on their funds in the event of bankruptcy of the site,” the Central Bank assured.
Kira Vinokurova, co-head of the sanctions law and compliance practice at Pen & Paper, also “does not see new risks” for investors even in the event of a real bankruptcy of the exchange: “Whether the exchange is in bankruptcy proceedings or outside of it does not matter for the issuance of licenses by the American regulator (OFAC) to individual investors “Almost the only condition for issuing a license is the non-receipt of benefits by the sanctioned entity and the avoidance of infringement of the rights of non-sanctioned investors.”
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