Policy on personal holding and trade of securities by ACRA employees

1. General provisions

The policy on personal holding and trade of securities by ACRA employees (hereinafter, the Policy) was developed in order to establish limitations and requirements for ACRA employees regarding the holding and trade of securities.

Limitations and restrictions provided by the Policy do not apply to pension contributions to non- state pension funds, investment units of unit investment funds, bank deposits and possession of other property that does not provide the possibility of influencing the activities of these individuals and does not lead to a Conflict of Interests connected with Confidential Information and/or other material Non-public Information at the disposal of ACRA employees.

The Policy was developed in accordance with requirements of clauses 2 and 3 of Article 10 of Federal Law No. 222-FZ, dated July 13, 2015, “On the Activities of Credit Rating Agencies in the Russian Federation, On the Amendment to Article 76.1 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’ and the invalidation of certain provisions of legal acts of the Russian Federation.”

The Policy shall be posted on the ACRA website (www.acra-ratings.com) following its approval by the Board of Directors.

2. List of terms and definitions

ACRA — Analytical Credit Rating Agency (Joint-Stock Company).

Analytical Unit — a set of ACRA structural units whose main tasks include the Rating Analysis, as well as the preparation of macroeconomic and sector research papers and forecasts.

Analytical Group — an ACRA structural unit whose main tasks include analyzing the creditworthiness of certain types of rated subjects according to the current Methodology as well as the preparation and implementation of rating actions.

Law on Rating Agencies — Federal Law No. 222-FZ, dated July 13, 2015, “On the Activities of Credit Rating Agencies in the Russian Federation, On the Amendment to Article 76.1 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’ and the invalidation of certain provisions of legal acts of the Russian Federation.”

Confidential Information — any information that is not generally available, including: (1) non- public information submitted by counterparties for rating actions in accordance with signed agreements; (2) material Non-public Information obtained from any source; (3) details and plans for specific Rating Actions; (4) unpublished press releases regarding rating actions or unpublished reports on research and forecasts; (5) non-public information related to the work process of the rating committee; (6) details of agreements with counterparties for rating and other services; (7) internal non-public financial information; (8) a development strategy, description of internal business processes, and other know-how; (9) insider information according to the list specified by the regulation of the Bank of Russia; (10) personal data of ACRA employees and employees of corporate counterparties.

Conflict of Interests — a situation when personal interests, direct or indirect, of ACRA, its shareholders, Rating Analysts, other ACRA employees and persons controlling or influencing them may negatively affect the independence and objectivity of ACRA (including credit ratings or credit rating outlooks), or entail other negative consequences for ACRA, its employees and/or Rated Entities.

Methodology — an ACRA internal document defining the principles and forms of analyzing quantitative and qualitative factors and applying models and key rating assumptions, which serves as the basis for decisions on a rating action.

Non-Public Information — information is considered non-public until it is spread in any way and by any means, providing access to this information to the public.

Rating Analyst — an employee of the ACRA Analytical Unit performing analytical functions required for rating actions.

Rated Entity — a legal or a public-law entity whose ability to meet its assumed financial obligations (creditworthiness, financial accountability, and financial sustainability) is explicitly or implicitly evaluated in an ACRA credit rating as a result of rating actions taken by ACRA in relation to this entity.

Compliance and Internal Control Service — ACRA unit performing the functions of an internal control body in compliance with the Law on Rating agencies and the statutory acts of the Bank of Russia.

Material Information — any information that can affect the value of public Securities, as well as information, which is material for investors when making their investment decisions concerning operations with Securities. The examples of Material Information for various companies are listed below:

  • Information concerning the planned assignment, modification, and suspension of a credit rating or other rating action with respect to an issuer of securities or securities accepted for on-exchange trading or in respect to which an application for on-exchange trading was submitted;
  • Unpublished financial statements (audited/unaudited);
  • Mergers and acquisitions, restructuring or asset sale/acquisition;
  • Appearance or exit of a major supplier/customer/counterparty, significant changes in contract liabilities;
  • Increase or decrease in dividends, split-up of shares/additional share issue;
  • Changes of management structure/top-management positions;
  • Potential legal proceedings.

Account — a brokerage account, controlled (directly or via a power of attorney) by an ACRA employee or a legal entity under his/her control, which makes it possible perform trading transactions in order to get profit from the purchase and sale of Securities.

Managed Account — an account, in the framework of which trade operations and decisions are made by a third party under the official consultative agreement; an owner of such an account does not retain the right to manage investment or trade activity at his/her own discretion.

Security — any traded financial instrument representing a traded asset. Within this Policy the term “Security” means, including but not limited to: shares, bonds, promissory notes as well as derivative financial instruments (including futures, options, swaps, etc.).

3.Prohibitions and limitations on operations with Securities

3.1.Limitations concerning ACRA employees and legal entities (including trust) under their control

3.1.1 Insider trading

It is prohibited to invest in Securities or perform transactions with Securities if an employee has material Non-Public Information regarding the issuers of these Securities or Securities themselves. The prohibition remains in force regardless of whether an issuer has an ACRA credit rating or not and irrespective of rating actions performed with regard to particular Securities or their issuers.

ACRA considers information on future rating actions as one of the types of material Non-Public Information available to ACRA employees. The ban on transactions with Securities in respect to which ACRA performed rating actions shall expire after three business days after the information ceases to be non-public.

3.1.2. Trade upon recommendation (“Tipping”)

It is prohibited to give advice to third parties regarding any operations with Securities in respect to which (or issuers of which) material Non-Public Information is available. It is forbidden to discuss the above information with third parties or distribute this information by any means that violates ACRA procedures of information disclosure or transferring information to third parties.

3.1.3. Investment in Securities of competitors

It is prohibited to invest in Securities or carry out operations with Securities issued by organizations performing rating activities or activities showing characteristics of rating activities.

3.1.4. Short-term trade, “short selling” and derivative financial instruments1

A purchased Security may not be sold earlier than 30 days after its acquisition except when its price at the time of sale is lower than the purchase price. In order to determine the time for purchase and sale of Securities for the purposes of the above provision, the “Last In, First Out” principle (“LIFO”) shall be used. A sold Security cannot be purchased again within a 30-day period.

It is prohibited to use "short selling" strategies to make a profit as a result of a Security’s price lowering.

It is prohibited to invest in derivative financial instruments whose underlying assets are the Securities of Rated Entities.

1 This ban does not apply to employees listed in Par. 4.1.

3.2.Limitations concerning employees of the ACRA Analytical Unit and legal entities (including trust) under their control

3.2.1. It is prohibited for Rating Analysts to invest in Securities or perform transactions with Securities issued by entities that have received ratings from the analytical group that the said analyst is part of. The prohibition remains in force regardless of whether this issuer or Security is an object of rating actions (or participates in Security placement) at the time of transaction or whether an issuer (or a Security) has an ACRA credit rating.

3.2.2. Should questions concerning a ban with regard to a certain Security arise, Rating Analysts shall contact the Compliance and Internal Control Service.

3.3. Limitations on participation in the process of a credit rating assignment

3.3.1. An ACRA employee may not directly or indirectly participate in the process of assigning or forecasting a credit rating or affect this process in any way if this employee or his/her family member or a legal entity controlled by this employee (including trust):

  1. holds Securities or performs operations with Securities of a Rated Entity or persons controlling or materially influencing them2;

  2. holds Securities or performs operations with Securities issued by any legal entity affiliated with a Rated Entity, which leads or can lead to a Conflict of Interests unacceptable for ACRA;

  3. holds Securities or performs operations with Securities issued by a lead underwriter, originator, organizer, or SPV, which leads or can lead to a Conflict of Interests unacceptable for ACRA;

  4. has or had any other relations with a Rated Entity or any other legal entity affiliated with it, which leads or can lead to a Conflict of Interests unacceptable for ACRA.

3.3.2. The prohibition specified in Par. 3.3.1 applies to the members of the rating committee that made a decision on a rating action (including non-voting members), as well as other employees of ACRA who may be involved in the rating assessment.

3.4. Limitations on participation in the development of Methodologies

An ACRA employee may not participate in or in any way affect the process of developing a Methodology that will be applied to an issuer/Security issued by an issuer if he/she holds Securities of this issuer.

2 Terms “control” and “material influence” are defined in accordance with the International Financial Reporting Standards recognized in the Russian Federation.

4.Disclosure of Accounts, Securities and performed operations by employees

4.1.Restrictions and prohibitions on information disclosure do not affect the following categories of employees provided that they do not have access to Confidential Information or to material Non-Public Information: 1) HR managers; 2) Secretaries working at the reception desk; 3) interns; 4) cleaning specialists, hired workers, drivers and couriers.

4.2. Disclosure of information by new employees

Newly hired ACRA employees with access to Confidential Information as well as to material Non-Public Information (with the exception of those listed in Par. 4.1), shall disclose information concerning Securities and Accounts (including Managed Accounts and non-active Accounts) in their possession and as well as in the possession of legal entities under their control within seven calendar days after the conclusion of an employment agreement by filling out and sending a data form in compliance with ACRA’s internal documents to the Compliance and Internal Control Service.

4.3.Disclosure of information on Accounts and operations with Securities

ACRA employees having access to Confidential Information as well as to material Non-Public Information (with the exception of those listed in Par. 4.1.) are obliged to:

  • disclose to the Compliance and Internal Control Service via e-mail all information about opening new Accounts (including Managed Accounts and non-active Accounts) and operations with Securities within 7 calendar days from their opening (or performance of respective operations);
  • disclose to the Compliance and Internal Control Service via e-mail current information about Accounts (including Managed Accounts and non-active Accounts) and existing Security portfolio on a quarterly basis;
  • disclose to the Compliance and Internal Control Service via e-mail information in the event of changes in the portfolio that are not the result of Securities transactions (for example, receiving Securities as a present, inheriting Securities, etc.) within 7 calendar days from the moment such changes occur.

4.4. Disclosure of information upon request

ACRA employees with access to Confidential Information or material Non-Public Information (with the exception of those listed in Par. 4.1.) are obliged to disclose information about Securities and Accounts (including Managed Accounts and non-active Accounts) in their possession and in the possession of legal entities under their control upon the request of the Compliance and Internal Control Service or the Board of Directors within 7 calendar days after receiving such a request.

4.5. Procedure of disclosing information on operations with Securities

  1. When disclosing information, ACRA employees (except for the CEO and the head of the Compliance and Internal Control Service) shall send the relevant information to the Compliance and Internal Control Service via e-mail.

  2. The Head of the Compliance and Internal Control Service shall disclose the relevant information to the CEO via e-mail.

  3. The CEO shall disclose the relevant information to ACRA’s Board of Directors via e-mail.

5.Mandatory Sale of Securities

5.1. Rating Analysts and legal entities under their control are obliged to get rid of (sell) Securities in their possession that violate the Policy as soon as possible but no later than the following timelines:

  • For newly hired employees/employees transferred from other departments (including other Analytical Groups): 30 calendar days;
  • If Securities are received as a gift or inherited, etc.: 60 calendar days.

5.2. If the requirements of the Policy are violated, the Securities that caused the violation (with the exception of cases listed in Par. 5.1.) must be sold immediately by the ACRA employee.

6. Final provisions

ACRA shall undertake all required measures to prevent the violation of the Policy’s requirements by ACRA employees.

When receiving data that an ACRA employee has committed (is committing) illegal, unethical actions or those that violate the Policy, or when there are reasons to believe that such actions have been committed, every ACRA employee must report such information to the Compliance and Internal Control Service. ACRA considers any failure to provide information about another ACRA employee committing illegal, unethical actions or actions that violate the Policy or ACRA’s internal documents (if an employee has such information) as complicity in such an action.

Violation of the Policy and the legislation of the Russian Federation on insider trading can result in administrative or criminal penalties and other civil penalties. Failure to comply with requirements of the Policy can result in disciplinary action against an employee, up to and including termination of employment.

Any deviations from this Policy should be documented in writing and agreed upon by the Compliance and Internal Control Service and the Board of Directors pursuant to the procedure established by ACRA’s internal documents. Any deviations from this Policy resulting in a breach of requirements contained in government regulations of the Russian Federation and requirements of the Bank of Russia are not permitted.

This Policy shall come into force from the moment of its approval by the ACRA

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