News (#05 May 2019)


EU has fined Fitch Rating Agency record sum

The European Securities and Markets Authority (ESMA) has fined the Fitch Rating Agency a record sum of EUR 5.1 million for violations of the rules of the financial market.

From June 2013 to April 2018 a 20% stake in Fitch was owned by an individual through a company located in France. At the same time, the shareholder of the Agency was a member of the Board of Directors of three subsidiaries of Fitch.

The regulator discovered that three subsidiaries of Fitch violated the conflict of interest requirements in the course of rating assessments conducted from 2013 to 2015 in respect of companies where the shareholder in Fitch was a member of the Board of Directors. In particular, the ESMA imposed a fine of almost EUR 3.2 million on the British subsidiary of Fitch, EUR 812000 on the French subsidiary and EUR 1.1 million on the Spanish.

According to the rules, which came into force in 2013, any shareholder with a share in the rating agency of more than 10% cannot take up a seat on the Board of Directors of any company whose rating is assessed by the Agency.

Goldman Sachs fined by UK regulator

The Financial Conduct Authority of the United Kingdom (FCA) has fined a division of the American bank Goldman Sachs GBP 34.3 million (USD 44.8 million) for committing reporting violations.

Goldman Sachs violated the requirements for accurate and timely provision of transaction data for almost ten years, from November 2007 to March 2017, according to FCA.

During this time the investment bank made a total of 220.2 million errors in its reports, the report said. For example, Goldman Sachs mistakenly informed the regulator about 6.6 million transactions that did not require declaration.

Goldman Sachs agreed to cooperate with the regulator and, as a result, received a discount of 30% of the total fine. Otherwise, Goldman Sachs would have had to pay GBP 49 million (USD 64 million).

State Property Fund lost appeal ruling to Ukrtelecom

Pursuant to the Ruling of the Northern Appelate Economic Court of Kyiv of February 2019, the Fund filed against an appeal against the decision of the Economic Court of Kyiv City, which rejected his reprivatization of Ukrtelecom and collection from ESU LLC owned by Rinat Akhmetov of USD† 81.9 million for delayed fulfillment of obligations regarding the introduction of investments.

The Fund substantiated its claim by the fact that ESU is improperly fulfilling the obligations it assumed when it bought state-owned Ukrtelecom in 2011. The company allegedly failed to introduce investments in the prescribed amount, did not create or transfer a special purpose telecommunication network to state ownership, the plaintiff declared.

In its turn, ESU stated that the investment of USD† 450 million was not a fixed condition of the Ukrtelecom privatization tender, and they were mentioned only as a УplanФ, and not a commitment.†

Thus, the State Property Fund lost the second court proceeding in the case of the reprivatization of Ukrtelecom, which is currently being considered by Ukrainian courts in second round proceedings.

Court imposed arrest on assets of Privat group of companies

The Pechersk District Court of Kyiv has arrested, after an application by the Prosecutor-GeneralТs Office, the assets of a number of companies that are directly and indirectly associated with the Privat group owned by Ihor Kolomoisky and Hennadii Boholiubov.

The assets were arrested in criminal proceedings on the possible withdrawal of UAH 19 billion of refinancing attracted by PrivatBank from the NBU prior to its nationalization.

In particular, the property of companies was arrested:

Ч Scorzonera (11 land plots, and parking area of 29,800 sq.m in Ivano-Frankivsk Region, Polianytsia village, and Schyvky land, house 3/2 (Bukovel);

Ч Art_Lab Group (land plot in Ivano-Frankivsk Region, Yaremche, Polianytsia);

Ч Tech-Trade-Invest (shop area of 39.8 sq.m in Ivano-Frankivsk Region, Yaremche, Polianytsia Village);

Ч Hadzhybei (8 land plots in Odesa Region, Ovidiopolsky District, Darnytskyi village council, Gold Coast);

Ч Privat Office (144 premises, buildings in Crimea and the Volyn, Dnipropetrovsk, Donetsk, Zhytomyr, Ivano-Frankivsk, Zaporizhzhia, Lviv, Kyiv, Kyrovohrad, Mykolaiv, Odesa, Poltava, Rivne, Sumy, Kharkiv, Kherson, Khmelnytsky, Chernihiv Regions);

Ч Estate-Service (3 premises in Volyn Region);

Ч Spectrum-Energy (3 premises in Donetsk, Kharkiv, Khmelnytsky Regions);

Ч Perspective-Investment (23 apartments, premises in city of Dnipro);

Ч Tolmachevsky mining and processing plant (2 locomotives);

Ч Nikopol ferroalloy plant (69 platforms, locomotives, electric locomotives, tanks).

Vinnitsagaz and Volyngaz failed to appeal against fines imposed by regulator

Vinnitsagaz and Volyngaz, members of Regional Gas Company Group, failed to lodge appeals to a court against the decision adopted by the National Commission for State Regulation of Energy and Public Utilities to recalculate the amounts of gas consumed by domestic consumers and to pay fines. In their claims, regional gas companies note that the fines may have negative financial consequences for companies followed by the inability of the latter to perform relevant functions as gas distribution network operators in full, which will endanger operation of the gas market.

The courts found arguments provided by the plaintiffs to be insufficient and refused to secure the claim. These decisions can be contested in appellate instances.

The Ukrainian Journal of Business Law

Subscribe to The Ukrainian Journal of Business Law right now and enjoy the most relevant issues on doing business in Ukraine on your device or in print.

All this for just USD 9.99 a month.


Subscribe now