Russian business asks regulators to extend permission not to disclose reports publicly
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Russian business is asking the regulators to extend the permission not to disclose publicly accounts that expired on July 1. Among the arguments, market participants cite the risks of expanding sanctions, as well as the alleged lack of data impact on the movement of securities quotes. However, investors do not agree with this interpretation and no longer want to invest “blindly”.
Two sources of Kommersant among brokers said that on July 31 a meeting was held with representatives of the Ministry of Finance, the Bank of Russia, the Moscow Exchange, issuers and professional participants in the securities market. Big business, in particular representatives of Gazprom, Uralchem and Rosseti, asked to change the provisions on information disclosure that have been in force since the beginning of July, “returning closer to the previous version,” one of Kommersant’s interlocutors explained. The Bank of Russia, the Ministry of Finance, the Moscow Exchange, as well as the listed companies did not respond to Kommersant’s requests.
In March 2022, the government allowed businesses not to disclose or disclose in a limited format information, including financial information, based on the requirements of the Laws “On the Securities Market” and “On Joint Stock Companies”. The moratorium was initially in effect until December 31, 2022, but was extended until July 1, 2023. The new government decree dated July 4, 2023 No. 1103 reduced the list of data that may not be disclosed, and determined the issuers who receive such a right.
As Tatiana Ivanenko, Head of the Department of Financial Consulting, Audit and IFRS KSK Group, notes, the new resolution gives issuers the opportunity not to disclose sensitive information if it can lead to sanctions pressure, or if the issuer is already subject to restrictive measures if it is included in the register of organizations OPK or performs the State Defense Order, is a bank serving the State Defense Order, etc.
Sensitive information includes information on affiliates and related parties with whom transactions were carried out, on the composition of shareholders, on the issuer’s financial investments, on the issuer’s business segments, on the availability of a license to carry out state defense orders, etc.
According to independent financial analyst Andrei Barkhota, for 2022, 75% of issuers traded on the Moscow Exchange reported under IFRS. However, in many cases, the statements were published with reductions in the structure of revenue, net profit and instruments used to convert foreign currency debt, the expert explains. Some of the issuers are Sberbank, LUKOIL, Rosneft, Rostelecom, Norilsk Nickel – publish, among other things, interim reports. Since last year, NLMK, Severstal, MMK, and ALROSA have not published reports under IFRS and RAS.
Positive Technologies said they participated in the meeting. The company discloses financial statements under IFRS and RAS, and, in its opinion, this helps issuers “maintain a high level of transparency and confidence on the part of the investment community.” PhosAgro said that they were not present at the meeting, but they do not use the opportunity to reduce the amount of information.
A number of large industrial companies noted that they are dissatisfied with the situation, but are preparing to publish financial results in the second half of August.
A Kommersant source in one of the companies believes that the disclosure of information “multiplies the risks of imposing and expanding sanctions.” “The argument of stock market participants that such a publication is necessary for its work does not correspond to reality. The value of shares of metallurgical companies over the past year and a half, that reporting is not published, grew and fell in correlation with the fall and recovery of Russia’s economic activity, ”emphasizes the interlocutor of Kommersant.
However, professional market participants do not agree with this assessment. “The position of the issuers is understandable, since the companies are doing more modestly compared to previous years, I don’t want to publish such figures,” says Alexander Tsyganov, director of the investment and corporate business department at Tsifra Broker. According to him, the opacity of the company can give a discount of up to 20% of the value of its shares.
The Bondholders Association (ABO) notes that “investing blindly is not the best option for developing the securities market.” If the issuer believes that there is no need to disclose financial statements, Alexander Berkunov, a member of the Board of the AVO, explained, then “it is not necessary to borrow money on the public market.”
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