Report on the Adherence to the Moscow Exchange Corporate Governance Code (hereinafter, the “MOEX CGC”) and the Results of the Implementation of Governance Principles Presented in MOEX CGC In accordance with Bank of Russia Ordinance No. 5062-U of 17/01/2019.
Moscow Exchange (hereinafter, MOEX) fully complies with its own Corporate Governance Code approved in a new version by the Resolution of the Supervisory Board of 14/10/2019.
N | Principle | Implementation Results |
|---|---|---|
1 | Support of MOEX governance system that corresponds to its strategic goals, corporate values, activity peculiarities and clients’ needs and interests | A special feature of MOEX is that, on the one hand, it is a public company with shares traded on the regulated market and, on the other hand, it sets corporate governance standards for Russian public companies (including itself) as a part of the listing procedure. In this regard, active participation of MOEX and MOEX Group in improving the level of corporate governance of Russian companies is one of its strategic initiatives, set out in its strategy. Compliance with the principles and best practices of corporate governance, as well as Group’s strategy, is a key condition for MOEX successful development. MOEX aims to set the example for other public companies in implementing high standards of corporate governance. MOEX’s corporate governance system includes the system of governing bodies, supervisory bodies and other MOEX bodies and the system of the relationship between control bodies, supervisory bodies, other MOEX bodies and its shareholders, as well as their engagement with stakeholders. The system of MOEX bodies engagement with MOEX shareholders and stakeholders is based on the following principles:
|
2 | Support to MOEX Supervisory Board’s activities based on the following: | |
| In accordance with MOEX Charter, the Supervisory Board performs strategic governance of MOEX through the following:
MOEX strategic goals are defined under the MOEX Group Strategy. Strategic goals of MOEX are subject to continuous monitoring based on the Strategy of the Group. Thus, in 2019, the Supervisory Board approved the MOEX Group Strategy (preliminary considered at the meeting of the Strategy Planning Committee of the Supervisory Board) by its Resolution dated14/10/2019. The Strategy defines MOEX strategic goals until 2024. In 2020 the Supervisory Board approved the following strategies of MOEX and MOEX Group:
The Supervisory Board also approved the transition to a three-year financial forecasting (business planning) in 2020 in line with the approved approaches (decision taken on 01/10/2020), approved the consolidated business plan (budget) of the Group for | |
| The Supervisory Board controls activities of executive bodies by means of the following:
In 2020 the Supervisory Board reviewed and took under advisement the following documents:
On 05/03/2020 the Supervisory Board decided on bonus payment to members of the Executive Board based on 2019 performance. On 10/12/2020, the Supervisory Board approved individual KPIs (targets) principles for members of the Executive Board and also approved individual KPIs (targets) with their weights, thresholds and bonus calculation algorithms linked to KPIs) for 2021 for the MOEX CEO (Chairman of the Executive Board). | |
| The MOEX Supervisory Board assesses its performance and performance of its members, as well as performance of committees at the Supervisory Board. Working efficiency of the Supervisory Board and committees of the Supervisory Board is assessed based on the MOEX Methodology of Corporate Governance Assessment approved by the MOEX Supervisory Board on 21/10/2016. Performance assessment is carried out in a form of internal assessment (self-assessment and competence Thus, in spring 2019, an external independent consultant, LEADERSHIP VECTOR company, assessed the Supervisory Board’s performance. The findings of the external assessment (Report of the independent consultant On the Results of the External Assessment) were considered at the in-person meeting of the MOEX Supervisory Board on 25/04/2019. A substantial part of the recommendations mentioned in the Report was implemented, while some recommendations are in the process of implementation. In 2020, an internal assessment of performance of MOEX Supervisory Board and committees at the Supervisory Board was performed. Based on the performance assessment results, the Director of the Corporate Governance Department reviewed and prepared a report along with an action plan to improve current corporate governance processes related to the performance and delineation of authorities of governing bodies. Information on findings of performance assessment of the Supervisory Board and committees at the Supervisory Board is included in the annual report and is disclosed on the official website of MOEX. | |
| MOEX Supervisory Board’s governance and control functions are segregated according to the Charter. The Supervisory Board controls, among other things, the following:
In regards to governance functions, the Supervisory Board provides, among other things, overall management, namely, the Supervisory Board determines the main guidelines, development strategy and priorities, annually approves consolidated budget of the MOEX Group, defines principles and approaches to the organization of risk management, internal control and internal audit systems. Members of the Supervisory Board act in the interests of MOEX in good faith and reasonably. They are obliged to reimburse MOEX and shareholders acting in the interests of MOEX, for losses caused to the Company through their fault, if it is proved that the member of the Supervisory Board acted in bad faith or unreasonably in exercising his/her rights and performing his/her duties, including if his/her actions (omissions) were not consistent with the ordinary terms of civil-law transactions or normal business risk. | |
3 | Ensuring the functioning of internal control, internal audit, MOEX risk management system | MOEX has in place the risk management and internal control system that complies, among others, with the requirements of the Russian legislation applicable to MOEX as to a trade organiser, as well as with international recommendations for building risk management and internal control systems. The risk-oriented approach is applied to the internal control system. Internal control is ensured by MOEX governing bodies (General Meeting of Shareholders, Supervisory Board, Executive Board and the Chairman of the Executive Board), Audit Committee of the Supervisory Board, external auditor, Internal Audit Service, Internal Control Service, Internal Control and Compliance Department, risk and business continuity management subdivisions, security subdivisions, other subdivisions and employees of MOEX (those including the Chief Accountant and its deputies), that control compliance within the scope of authorities outlined in MOEX internal documents. The internal control follows the three lines of defence principle, which is in line with the best international practices. The first line of defence means all employees of MOEX business functions and operation subdivisions involved in the detection, assessment, and management of risks inherent in daily activity, as well as in development and implementation of policies and procedures that govern existing business processes. The second line of defence comprises of the Department for Operational Risk, Information Security and Business Continuity, Internal Control and Compliance Department, Internal Control Service, Security Department, Legal Department and certain Finance Block employees and subdivisions. The second line of defence performs continuous monitoring and risk management, controls MOEX compliance with the federal laws and regulations adopted in accordance with them, compliance with trading rules and MOEX constituent and internal documents for the following areas:
The second line of defence supports the first line of defence on the matters regarding identification of regulatory risks, development and implementation of control procedures, clarification of applicable law requirements, preparation of monitoring reports for governing bodies. The third line of defence is the Internal Audit Service that independently assesses performance of processes developed by the first and second lines of defence, delivers independent and objective information to governing bodies on efficiency and effectiveness of financial and economic activity, efficiency of assets and liabilities management, including assets safety, risk management efficiency. The governing bodies of MOEX define internal control and risk management principles and approaches. MOEX has in place a risk management system appropriate to the nature and scope of MOEX transactions. The system includes risk mitigation measures, risk monitoring system that ensures submission of necessary information to MOEX governing bodies, as well as the process to manage major risk groups that may adversely affect its activities. Risk management functions are distributed between the Supervisory Board and its committees, executive bodies, heads of subdivisions responsible for particular directions of MOEX activities where risks may arise, special subdivision responsible for risks arising in the activities of the trade organiser, Internal Control Service, as well as consultative and advisory bodies of MOEX. From 2019, MOEX risk management priorities shifted to predicting potential risks. In October 2020, the Supervisory Board approved the Group’s Risk Management System Strategy until 2024 (hereinafter, the Risk Management Strategy 2024). |
The Risk Management Strategy outlined the following lines for risk management development:
The Risk Management Strategy 2024 defines the following priorities in managing non-financial risks:
The Risk Management Strategy 2024 also defines success criteria, risks related to the Risk Management Strategy 2024 implementation and measures aimed at preventing such risks. Information on the risk management system is brought to shareholders, trading and clearing members, the Bank of Russia, and other stakeholders on a regular basis either by reporting or by posting information on the website. “Stabilisation 3.0” program, which comprises of independent assessment of the internal control system and implementation of operational and compliance risk mitigation efforts is implemented at the level of MOEX Group. One of the main focuses of the program is to improve compliance culture and develop new channels for risk с communication among employees of MOEX Group companies. Seeking to develop a unified approach to the compliance risk management in the Group companies and to coordinate the relevant divisions of the Group companies, the Company has established the Steering Committee for Compliance at the Chairman of the MOEX Executive Board. The main objective of the establishes Committee is to develop unified compliance risk management policies and procedures for the Group companies. MOEX ensures independent internal audit function (Internal Audit Service) by segregating its functional and administrative accountability. Within functional accountability, the Supervisory Board took the following decisions:
Within administrative accountability, the Chairman of the Executive Board:
Internal audits at MOEX, including relations between the Internal Audit Service and other divisions and the external auditor of MOEX, are organised and exercised in accordance with the Regulations on the Internal Audit Service. Internal audit employees operate within the framework of applicable laws and professional standards. | ||
4 | Ensuring prevention, identification, and settlement of conflicts of interest related to MOEX activity, as well as the fight against corruption | Measures taken by MOEX as by a trade organiser to prevent conflicts of interest are regulated by MOEX internal documents, those including the List of measures aimed at preventing of a conflict of interest in the course of Moscow Exchanges activity on organising trades. Such measures are aimed to prevent situations in which personal interest of MOEX employees may affect their fair and efficient performance of duties. In terms of managing corruption risks, MOEX follows key principles set out in the Anti-corruption Policy approved in 2020. Namely, a zero tolerance approach to corruption; employees involvement in corruption practices; development and implementation of measures to minimise the likelihood of involvement of MOEX and its employees in corruption practices; investigations in case of reasonably reported violations of procedures for preventing and fighting against corruption and bringing the guilty persons to justice regardless of their position, length of service or other conditions, if they commit corruption offences in their job duties; mandatory screening of counterparties; monitoring anti-corruption standards effectiveness and procedures implemented. MOEX prevents, detects corruption and manages anti-corruption efforts through the instruments described in the Policy. In particular, through the following:
Measures aimed at the management of a conflict of interests, arising in cases of conflict between MOEX interests and personal interests of the members of control bodies due to their business, friendly, family and other ties and relations, as well as in cases of conflict between their responsibilities in relation to MOEX and to other persons, are defined in The Policy on the Management of a Conflict of Interests and Corporate Conflict in Moscow Exchange approved by the Supervisory Board. The Policy defines obligations of the governing body membership towards implementation of measures to manage conflicts of interest, outlines approaches and methods to prevent and detect conflicts of interest, including identification of transactions involving a conflict of interest (those including transactions with securities of MOEX, interested-party transactions and transactions made outside the ordinary course of business that have a potential conflict of interest). |
5 | Ensuring equal and fair attitude towards all shareholders (participants) in exercising their right to participate in MOEX governance, as well as the balance between the rights and interests of customers, MOEX contractors and other stakeholders | MOEX ensures equal and fair attitude towards all shareholders in exercising their right to participate in the governance of the Company. One special feature of MOEX’s shareholding structure is the absence of a controlling shareholder. Each shareholder is entitled to take part in the General Meeting of Shareholders held in a form of joint presence, exercising the right to vote in a convenient manner: by sending voting bulletin by mail, personally participating or using an electronic form of voting. MOEX shareholders are allowed to vote electronically by filling in an electronic voting ballot on the website. To ensure equal attitude towards all shareholders, MOEX provides information on holding the meetings, including materials for the meeting, both in Russian and in English, voting ballots are also available into English, which, in accordance with OECD recommendations, eliminates obstacles for shareholders from abroad to vote. In preparation for the AGM, MOEX holds the Shareholder Day in a form of an Internet conference where the MOEX management tells about the results of the year and answers questions of the conference participants in real time. At General Meetings, shareholders are given the opportunity to communicate with MOEX management and receive feedback on the issues of their interest, and members of the executive bodies and members of the Supervisory Board, the Chief Accountant, representatives of the auditor, and candidates nominated for election to the Supervisory Board are always invited to attend the Annual General Meeting. Given that many of the MOEX’s shareholders are also its customers, MOEX ensures equal treatment of customers in offering its services, thereby avoiding any unfair advantage. MOEX follows the principle of respecting the best interests of MOEX and MOEX Group service users through creating user committees by type of activities carried out by financial market participants, type of contracts executed in organised trading and type of securities placed by issuers. Along with user committees, which simultaneously serve as market section councils according to laws on organised trading, MOEX has in place individual committees to ensure a regular dialogue with its customers and their participation in shaping business initiatives. The user committees are used as a basis for most of the business innovations that MOEX implements, as well as for tariff policy and technological solutions. Moreover, MOEX strives to build long-term and sustainable mutually beneficial relations with its contractors. MOEX has in place a competitive procedure for selecting contractors that makes the contracting process transparent and allows to select the best contractors for the company. |
6 | Ensuring transparency of MOEX activity and effective communication with its shareholders (participants) and other stakeholders | MOEX sees timely and full disclosure of information as an important tool for building long-term confidence-based relations with shareholders, adding to MOEX’s value and its ability to raise capital and for maintaining confidence of shareholders, investors, and other stakeholders. MOEX seeks to ensure that its shareholders and other stakeholders have access to information on all material facts of the MOEX’s operations to enable them to make informed investment and management decisions. The main approaches and principles of information disclosure by MOEX are established by the Information Policy approved by the Supervisory Board in 2020 in it new version. According to the Information Policy information disclosed by the MOEX is divided into three groups:
For user convenience, on the official website of MOEX in the Internet Information Disclosure and Compliance sections are available. The Information Disclosure section comprises of the following subsections: Issuer’s Information Disclosure , Trade Organiser’s Information Disclosure, Financial Platform Operator’s Information Disclosure, and Other Disclosures. Information is also disclosed by publishing in the news feed. Compliance section comprises of the following subsections: Fight Against Corruption, Business Ethics, Compliance Hotline. For foreign shareholders and investors a special section https://www.moex.com/en/ is available on the English version of the MOEX website, which contains news for investors, key information on MOEX shares, dividend policy and payments, MOEX activity financial and operating results, corporate governance, past and upcoming events for investors and shareholders, as well as contact information. The Head of Investor Relations is responsible for shareholder and investor communications. Contact details are available on the website of MOEX. MOEX management regularly communicates with investors and shareholders and their representatives through news feeds, press releases, annual reports, presentations and other investor materials, meetings and special events for analysts and investors, road shows, investor conferences, as well as quarterly conference calls and webcasts for analysts and investors with financial highlights presentations for the reporting period and management commentary. MOEX management also actively engages with the media. These measures allow both investors and shareholders to obtain relevant information, which helps them to make informed investment decisions. Relations with current shareholders of MOEX and, if necessary, with shareholders/participants of MOEX Group companies, including during the preparation for the General Meetings of Shareholders, are ensured by the Corporate Governance Department. |
7 | Striving for further development with a view to sustainable development of MOEX and increased return on investments to the equity capital | Seeking to ensure sustainable development and increase in the return on investments to the equity capital in the long term, MOEX governing bodies acknowledge the need for continuous improvement of MOEX corporate governance system, taking into account its development and the impact of external factors, as well as the need for ongoing control over the observance of the rights and interests of shareholders and other stakeholders. |