Millions of Ukrainians are still looking for their vouchers

The Securities and Stock Market State Commission is still besieged by calls and letters from outraged citizens trying to get their compensation and property certificates, commonly known as vouchers. The SSMSC head office receives 15-20 such complaints every day. Investment funds and trust partnerships reached their peak in 1994-97, talking people into parting with their vouchers and money while promising mind-boggling dividends. More often than not they would afterward vanish into thin air along with the loot. Certificate auction centers started functioning only in 1997, allowing people to invest their certificates in company stocks directly, without all those distrusted trusts. Yet several million individuals were duped and are now trying to find out about their vouchers and money, which is a very difficult task. They can count on being refunded 50-80 hryvnias at best – a significant sum for many, especially pensioners, so people are out on the hunt. The Day asked Inna HRYBENKO, head of the SSMSC investor rights protection department, to help such citizens with professional recommendations.

The Day: Years have passed since the paper privatization. How relevant is this problem now?

I. H.: Last year’s statistics show that almost one half of 10,000 complaints received by the investor rights protection department relate to financial intermediaries that were especially active in trading property privatization and compensation certificates, and gullible citizens’ hard cash. These are above all the notorious Kyivska Rus’ MDS, TEKST Investment Company, First Ukrainian Privatization Fund, Dikom, Olby Dovira, Olby Ukraine, Riznoeksport Concern, etc. There are many reasons for such grievances, but the most important one is that there was too much and not always correct advertising at the time. Mostly people heard about guaranteed fantastic dividends and nothing about the investor rights and company obligations and liabilities. Now there is practically no talk about dividends, for the companies that did pay such dividends can be counted on the fingers of one hand. The duped investors try at least to locate such companies to find out what has come of their privatization papers.

The Day: How can you actually help people complaining to the commission?

I. H.: We carefully study all such letters, with an eye to the elderly hoping to somehow improve their financial status and receive dividends, however small. We provide all the information we have, the company’s whereabouts, shareholders’ rights, company liabilities, how a matter can be brought to court or if there are other options, and how the commission can step in, if it can.

The Day: What is the commission’s jurisdiction?

I. H.: It’s limited. I’d like to point out that there were all those ill- famed trusts handling foreign exchange funds. That’s out of our province, for those were mostly civil law agreements and I can’t think of a government agency specializing in trust partnerships. This problem must be handled by law enforcement authorities or by courts of law. There is the State Property Fund: it deals with trust partnerships, for it issued licenses allowing them transactions with privatization papers. At present, the situation with such partnerships is very complicated, because in a large number of cases the licenses are rescinded. Several trust partnerships are left that can be contacted to find about certificates and try to get paid.

The Day: Does this mean that there is no way to get back one’s money if the license is revoked?

I. H.: You’d better ask the State Property Fund, they are responsible for the performance of trust partnerships. I think that there is nothing to be done about privatization papers if the license is revoked. No payments can be made.

The Day: Suppose you find the company that took your voucher, what is the next step?

I. H.: I suggest that you get in touch with that company. Not by phone but by writing a letter, stating your name, address, and the circumstances, enclosing copies of the agreements or certificates relating to that company. But never send the original agreements or certificates. You can either state the instrument’s number or send a copy. And you must make a clear statement of your case. Under the law on citizens’ statements and complaints, that company will have to respond within thirty days. If no response is forthcoming, and if that company is a securities market operator, you are welcome to turn to our commission – our you can go to court.

The Day: Through with all these procedures, how much is your chance of getting back your money?

I. H.: We help people locate such companies and find out about their privatization papers; there are cases when payments are eventually made, although what people get in the end does not satisfy them. Mostly they can be paid between 10 and 50 hryvnias, the cost of the privatization certificate, maybe 14-21 hryvnias if there are some dividends accrued during the year. Riznoeksport is making such payments, assigning the cost of the certificate and some dividends, and so is the Riznoeksport Trust Partnership.

The Day: Are there companies that still function without paying investors?

I. H.: It is important to understand the specifics. All financial intermediaries are divided into (a) trust partnerships and (b) investment funds and investment companies. The trust partnerships are governed by their own bylaws and the investment funds and companies also operate in a very special way. A closed end investment fund is established for a certain term, so payments can be made only after the term expires. Very many letters are sent by elderly people, they believe they will not live to see this money. Kyivska Rus’. for example, had its term extended to 2030, so people of a certain age are sure they won’t live that long. It’s a problem, but it exists in the current legislation.

The Day: How many investors are affected by this problem in Ukraine?

I. H.: This is hard to say. Practically the entire population became involved in the privatization process in a short while, and the current situation is explained by lack of knowledge about one’s rights and obligations.

The Day: Can such investors receive information about the originators of such companies, I mean all those that took their money and disappeared? We all know that most of them operate legally in Ukraine.

I. H.: This is a difficult question. Criminal proceedings have been initiated with regard to a number of such executives. From what I know, most such cases have been dismissed. We don’t have enough information about how such cases are handled in court, but from what people tell us on the phone or write in their letters, it is clear that getting back one’s money is very difficult, especially if the company has changed its institutional and legal status, let alone when the founders have disappeared.

The Day: Your commission is drowned under letters of grievances, but still, where is one to turn for help to learn about one’s certificate?

I. H.: The commission consists of the head office and territorial departments, each operating in a district center, also in Sevastopol and Kryvy Rih. I would suggest that people contact such territorial departments for explanations, they are manned by very good specialists who have all the required information and are ready to help.