Investments or how to cover risks through lost profits
The question of investment, the ways and forms of their provision and receipt, the terms of contracts which they can mediate one of the most frequent. Even in Russia, and contrary to what may happen with us.
That is why the ways to minimize the risks of investors are important. About one of these successful, successful ways.
The case will be interesting to those who are interested in the issues of investment activity, as well as the peculiarities of conducting activities by professional participants of various markets, collecting lost profits.
So. Resolution of the Federal Arbitration Court of the Moscow District of March 27, 2014 in case No. A40-50359 / 13 and the decision of the Moscow Arbitration Court of September 30, 2014.
The non-state pension fund filed a claim with the trustee of its pension reserves for recovery of losses.
Under the terms of the contract, the Founder of the management transferred the pension reserves to the Manager in trust (a set of funds owned by the Fund and intended to fulfill obligations to the fund participants in accordance with pension agreements), and the Manager undertook to form an investment portfolio (hereinafter referred to as Assets) and manage investment portfolio (assets) in the interests of the Trustor on the principles of reliability, security, liquidity, profitability and divers ifikatsii.
Management of the investment portfolio was supposed to be carried out in accordance with the investment declaration, which is Annex No. 1 to the contract. In this annex, a list of issuers was also agreed. In accordance with clause 5.4 of the contract, the Governor is obliged, including strictly adhere to the directions and objects of investment agreed in the investment declaration. The composition and structure of assets must comply with the investment declaration. The acquisition of assets not covered by this declaration, or actions aimed at increasing their share in the structure of assets, was not allowed.
In the Manager’s report, shares of issuers that violate the investment declaration were found in the assets.
This was the basis for the refusal of the contract and the presentation of claims for the recovery of losses, including lost profits in the amount of 10.3 million rubles.
The court partially satisfied the claims, including collecting lost profits.
In this case, we note the following interesting points that may be useful in other cases, cases, situations.
1. The contract specified the purpose of the provision of funds - the preservation and growth of funds.
2. Since cash is the means of pension reserves, safety and profitability is ensured through diversification and liquidity of investment portfolios, accounting for the reliability of securities, and professional management of the investment process (Art.24-25 of Law No. 75-FZ).
3. Loss of profit is the amount of income that the Fund (Investor) could receive if the Management Company fulfilled the requirements of the Investment Declaration and invested pension reserves in more reliable instruments of the Russian securities market compared to ordinary shares of Russian open joint-stock companies that are not met the requirements of the Investment Declaration.
4. When investing in shares, profits are generated due to fluctuations in the market prices of the relevant securities in the event of short-term changes in market conditions.
5. The tactics of investing in stocks are used in aggressive and moderate investment strategies aimed at quick and significant profit.
According to the principles of reliability, safety, liquidity, profitability and diversification, which are the basis of Contract No. UR14896, the Investment Portfolio (Asset) in the interests of the Foundation should be managed by the Management Company using its professional knowledge in such a way that the final result of the management of pension reserves showed not only preservation of the initial capital, but also its growth.
6. The manager must predict the risks associated with the management of pension reserves funds, which entail a departure from the conservative strategy of investing these funds in order to prevent the decline in the value of the managed Assets in time and ensure their profitability.
When investing funds of pension reserves, the invested capital should bring low, but stable monthly profit. The risks of investing in this case should not be significant. Otherwise, the principles of safety and profitability are violated.
7. Professional participants in the securities market to protect against risks use the tactics of investing funds from pension reserves and pension savings in government securities of the Russian Federation (State Short-Term Bonds (GKO), Federal Bonds (OFZ), issued by the Ministry of Finance of the Russian Federation). This tool allows you to balance the investment portfolio of a large investor and is used, including the State Corporation "Bank for Development and Foreign Economic Affairs" Vnesheconombank ", which is the largest asset management company of pension savings in the Russian Federation, using a conservative strategy for the formation of an investment portfolio.
8. Investment in government bonds is calculated based on the expected growth of accrued coupon income, which does not depend on fluctuations in the value of bonds, which fully corresponds to the strategy of minimizing market risk when investing funds from pension reserves. The liquidity of government bonds is provided by the Russian Federation, which makes these securities the most reliable on the Russian stock market.
According to the Vnesheconombank Report on income from investing pension savings funds for the 4th quarter of 2012, the average income from investing pension savings funds as a percentage of the average annual net asset value of Vnesheconombank by cumulative results from the beginning of 2012 was 8.97 percent.
9. But the court found that income at the rate of 8.97 percent is not average. They took into account the rates of income under contracts with 2 other management companies. As a result, the rate became equal to 7.67 percent, which allowed only partially to satisfy the claim for loss of profits (in cash equivalent of 7.55 million rubles).
Comments
1. I specifically tried as much as possible to quote those provisions of the judicial act that allow you to understand the rationale adopted by the court to satisfy the claim. This may allow readers to draw conclusions themselves, without resorting to the opinions of other persons, including mine.
2. Nevertheless, it is worthwhile to move away from the particular case of regulating the placement of funds related to pension reserves and regulating relations in this area by a separate law. Here it is important to include in the contracts for the provision of funds conditions, including those related to the so-called conditions of guarantees and assurances, which allow to fix the conditions for the provision of funds. And what is probably the most important thing is their age and mandatory growth.
If they are present in the contract or the interpretation of other conditions that allow to make a conclusion about the goals, the will of the parties, the approach in dealing with such cases should be similar.
Consequently, the terms of contracts must be duly executed, and if they are violated, the interested party has the right to demand judicial protection.
However, in my personal opinion, the approach voiced in this matter should also apply to those cases where the contract does not contain any of the provisions specified in paragraph 2.
Why?
Probably because the meaning of investment in itself is not only aimed at providing funds, but also at their safety and growth.
3. If so, with due diligence, rationality, and good faith, each of the parties to the contract should consider how they will fulfill their obligations and assess the risk of their failure.
4. Naturally, what I have said is true only for those situations where there are grounds to consider the actions of the counterparty to be illegal. In other cases, you should not shift your own problems to others.
October 21, 2014.
Vitaly Vetrov - Managing Partner of the Firm and the author of this material
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