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. Last Updated: 07/27/2016

Court Bars Fyodorov From Gazprom Vote

A Moscow court has frozen a stake in gas giant Gazprom in a move that could keep minority shareholders from voting at an annual meeting, the investment bank that administers the investment vehicles said Friday.

United Financial Group chairman Charles Ryan said a court had put an injunction on a block of shares held by two UFG-administered investment vehicles that hold Gazprom local shares on behalf of clients.

"They are basically freezing the shares while they figure out if anything was done wrong," Ryan said. "I'm not actually worried about any of our clients losing property," he added.

"I'm worried about them losing their rights over the property [and not getting the rights back] in time to participate in the meeting."

Ryan said he did not know the plaintiff's name.

The court documents, obtained from the law firm representing the plaintiff, say the Moscow arbitration court froze the Gazprom shares belonging to the two firms, Arial and Onix-Invest.

It also banned the registrar from including the two companies in the share register and effectively forbidding them from voting at a June 29 shareholders meeting.

The court also ordered Gazprom to exclude board candidates put up by the two firms, including Ryan, UFG founder Boris Fyodorov, a current Gazprom board member, and two others. The names of the plaintiff and the judge who issued the decision were obliterated on the copies of the documents.

The Association for Minority Shareholders' Rights Protection — which is backing the plaintiff in the case — said the Moscow arbitration court ruled last Monday that Onix-Invest and Arial were fully foreign-owned and therefore banned from directly holding Gazprom shares.

The court documents, dated May 4, made no mention of such a ruling and a court spokesman was not immediately able to confirm the statement issued by the association.

Foreigners can buy Gazprom only through American Depositary Shares that trade at a great premium to locally quoted stock, but some foreigners have circumvented the restriction by setting up Russian companies to hold the shares for them.

Maxim Malyev, head of the financial products department for UFG, said foreign shareholders held less than 50 percent stakes in the two subsidiaries, making them Russian firms. "These are very aggressive actions. We are trying to find out who filed the suit," he said. Sergei Karpov, chairman of the investors' rights group, declined to say who had filed the suit, but his group said it was a minority Gazprom shareholder and an association member.

Fyodorov, a former deputy prime minister and finance minister, has repeatedly called for an end to the ring fence. He currently sits on the Gazprom board.

UFG said Fyodorov was no longer a UFG shareholder.

The row over the minority stake sent Russian shares lower Friday as it dented sentiment and spurred investors to book some profits on recent gains.

The RTS index closed down 1.39 percent at 195.33 on volume of $15.5 million, while the broader Reuters Russian Composite eased 1.95 percent to 1,214.50.

Aton trader Vladimir Sporynin said the court's decision on Gazprom had soured the mood somewhat.

Gazprom local shares, which are banned from direct foreign ownership, dropped 4.64 percent to 9.82 rubles.

Renaissance Capital trader Sam Barden said the freezing of the shares could have repercussions on foreign investor sentiment toward Russian assets.

"From a market point of view it's better for all participants to support it, because it's really a minority shareholder issue," Barden said.