Moscow Exchange corporate governance model and practice in brief

Moscow Exchange’s current corporate governance system reflects its unique position as one of the largest Russian public companies included in the MSCI Russia Index (Bloomberg MXRU). The Bank of Russia is a Moscow Exchange a shareholder and the financial markets regulator, while Moscow Exchange, as an infrastructure operator of the market, establishes binding rules for all other issuers.

Accordingly, the Federal Law on Organised Trading (hereinafter, the Law) establishes additional requirements for the management bodies and founders (participants) of the market operator, in particular that:

1. members of the Supervisory Board must meet the requirements for professional experience and business reputation;
2. members of the executive bodies must meet the requirements for professional experience, reputation and expertise, and they must be approved by the regulator, i.e. the Bank of Russia;
3. those founders (participants) who own more than 5 per cent of the authorised capital of Moscow Exchange may not include legal entities whose financial licence has been cancelled (withdrawn) for any violation or who are registered in offshore jurisdictions, or individuals who do not meet the business reputation requirements.

Additional requirements have also been established for the heads of branches, the Chief Accountant, the Head of the Risk Management Department, the Head of the Internal Audit Service, the Head of the Internal Control Service, the Head of the department in charge of trading.

In 2015, the following amendments were introduced in the Law:

1. the Chairman of the Executive Board must be elected by the Supervisory Board of the Exchange;
2. the competence of the Supervisory Board must additionally include the approval of the head of the Internal Audit Service and the work plan of the Internal Audit Service;
3. issues related to the reporting, appointment and dismissal of the Head of the Internal Audit Service are withdrawn from the remit of the Supervisory Board and transferred to the remit of the Chairman of the Executive Board.

Corresponding changes will be duly introduced into Moscow Exchange’s Charter and other internal regulations. Note that some of the above provisions of the Law contain stipulations that distinguish the corporate governance system of Moscow Exchange as a market operator from the principles and recommendations of the model Corporate Governance Code issued by the Bank of Russia.

Since the shares in Moscow Exchange are admitted to trading and kept in the quotation list of the first (highest) level, the following actions were taken in 2015 in order to comply with the corporate governance requirements set out in the Listing Rules of ZAO MICEX Stock Exchange (hereinafter, the Listing Rules):

1. Five independent directors were elected to the Supervisory Board;
2. Independent directors meet the independence criteria established by the Listing Rules;
3. The Audit Committee consists only of the independent members of the Supervisory Board;
4. Regulations on the Corporate Secretary were adopted in line with the Listing Rules;
5. The Director of the Corporate Governance Department of the Exchange was appointed the Corporate Secretary;
6. The Exchange’s Dividend Policy was approved;
7. The Head of the Internal Audit Service was made accountable to the Supervisory Board and will be appointed and dismissed by the Supervisory Board. The purposes, objectives and powers of the Internal Audit Service are set forth in the regulations approved by the Supervisory Board;
8. A provision was introduced into Moscow Exchange’s Charter stating that the notice of the Annual General Meeting of Shareholders must be announced no later than 30 days before the meeting;
9. A provision was introduced into the Regulations on the General Meeting of Shareholders stating that the date for compiling the list of people entitled to participate in the meeting must be disclosed at least seven days prior to said date.