Our Chief Executive Officer and senior management are responsible for identifying and assessing our exposure to risk and developing risk controls related to significant business activities and Company objectives, developing programs to determine the sufficiency of risk identification, balancing of potential risk to potential reward and the appropriate manner in which to control risk. It is the responsibility of our management to develop and implement our short-term and long-term objectives and to identify, evaluate, manage and mitigate the risks inherent in seeking to achieve those objectives. The Board’s responsibility is to oversee and monitor the Company’s risk management processes and efforts of senior management.management within the Company’s risk framework as informed by the Company’s strategy and available resources. As described in more detail below, this is carried out primarily through various board committees which report to our full board. The Board coordinates with the audit committee, risk committee and management regarding the Company’s cyber and technology security and related risks.
The memberships of each committee as of the date of this proxy statement are listed below:
“X” indicates membership on the committee.
“C” indicates that the director serves as the chair of the committee.
* Mr. Turlov and Mr. Tashtitov do not meet the independence standards of the Nasdaq Stock Market.
The audit committee oversees our financial reporting process on behalf of the Board. Management is responsible for our internal controls, financial reporting process and compliance with laws, regulations and ethical business standards. Our independent registered public accounting firm is responsible for performing an integrated audit of our consolidated financial statements and of our internal control over financial reporting in accordance with standards of the PCAOB, and to issue opinions thereon. The audit committee’s responsibility is to monitor and oversee these processes. In this capacity, the audit committee provides advice, counsel, and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors, and the experience of the audit committee’s members in business, financial and accounting matters.
The audit committee reviewed and discussed with management and WSRP, LLC our independent registered public accounting firm, our audited financial statements for the fiscal year ended March 31, 2021.2022. The audit committee reviewed and discussed with management and WSRP, LLC management’s assessment of the effectiveness of the Company’s internal control over financial reporting and WSRP, LLC’s opinion about the effectiveness of the Company’s internal control over financial reporting. The audit committee discussed with WSRP, LLC the matters required to be discussed by applicable requirements of the PCAOB as currently in effect. The audit committee also received the written disclosures and the letter from WSRP, LLC required by applicable requirements of the PCAOB regarding auditor-audit committee communications concerning independence and discussed with WSRP, LLC its independence from Freedom Holding Corp. and itsFreedom Holding Corp’s management.
In reliance on the reviews and discussions referred to above, the audit committee recommended to the Board, and the Board approved, that our audited financial statements be included in the Company’s Annual Report. These are the same financial statements that appear in our Annual Report that has been filed with the SEC.
Pursuant to the proxy access provisions of our By-laws, a stockholder, or a group of not more than 20 stockholders, that has continuously owned for at least three years a number of shares that represents at least 3% of our outstanding voting shares can nominate for inclusion in the Company’s proxy statement a number of nominees not to exceed 20% of the number of directors in office as of the last day on which notice of a nomination may be delivered to the Company, or if such amount is not a whole number, the closest whole number less than 20%, provided that the
stockholder(s) and the stockholder nominee(s) satisfy the requirements specified in our By-laws. Such requirements include the timely delivery of a stockholder’s notice to our Corporate Secretary.
A stockholder’s notice pursuant to the proxy access provisions must set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made:
We do not have a formal policy requiring members of the Board to attend the annual meeting, although all directors are encouraged to attend if available. All the members of our Board attended the 20202021 annual meeting of stockholders, which was held virtually due to COVID-19 imposed restrictions.
As permitted by Nevada state corporate law, our Restated Articles of Incorporation and By-Laws authorize and require us to indemnify our officers and directors to the fullest extent permitted under Nevada law.
(5)
(4)Includes 40,00033,379 restricted shares granted to Mr. Ler as equity incentive compensation. Vesting of 6,621 of these shares is contingent upon Mr. Ler’s continuous service with the Company until March 31, 2022. Vesting of the remaining 33,379 shares is contingent upon Mr. Ler’s continuous service with us through the applicable vesting dates described below, and satisfaction of the continuous service requirement notwithstanding, (ii) if the weighted average closing price of our common shares for the 20 trading days prior to the first vesting date is less than 70% of the closing price of the common shares on the grant date, (May 18, 2021), and as to any subsequent vesting date, if the weighted average closing price of our common shares for the 20 trading days prior to thea vesting date is less than 70% of the weighted average closing price of theour common shares on the immediately prior vesting date, then the common shares scheduled to vest on the vesting date shall not vest but shall be automatically forfeited on the stated vesting date and we shall have no further obligations to Mr. Ler as to that portion of the restricted stock award forfeited. Assuming satisfaction of the foregoing vesting conditions, vesting of the 33,379 shares will occur as follows: 9,379 shares on May 18, 2023, 8,000 shares on May 18, 2024, 8,000 shares on May 18, 2025, and 8,000 shares on May 18, 2026. During the vesting periods, Mr. Ler will be the record owner of the restricted stock and he will be entitled to all the rights of a stockholder of the Company, including the right to vote and receive dividends or other distributions on the shares, provided, however, that dividend payments or other distributions on unvested shares shall be held in custody by the Company and subject to the same restrictions that apply to unvested shares. The shares will not be delivered until they vest, and he has no rights to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the shares until such shares vest, except as otherwise provided in the applicable grant agreement or the 2019 Plan. To the extent he forfeits shares of restricted stock for failure to satisfy and applicable vesting condition, he will no longer be entitled to any rights as a stockholder of the Company, including the rights to vote or receive dividends or other distributions on such forfeited shares.
(5) Includes 7,500 restricted shares granted to Mrs. Kiriaku as equity incentive compensation. Vesting of the 7,500 shares is contingent upon Mrs. Kiriaku’s continuous service with us through the applicable vesting dates described below, and satisfaction of the continuous service requirement notwithstanding, if the weighted average closing price of our common shares for the 20 trading days prior to a vesting date is less than 70% of the weighted average closing price of our common shares on the immediately prior vesting date, then the common shares scheduled to vest on the vesting date shall not vest but shall be automatically forfeited on the stated vesting date and we shall have no further obligations to Mrs. Kiriaku as to that portion of the restricted stock award forfeited. Assuming satisfaction of the foregoing vesting conditions, vesting of the 7,500 shares will occur as follows: 3,000 shares on May 18, 2023, 1,500 shares on May 18, 2024, 1,500 shares on May 18, 2025, and 1,500 shares on May 18, 2026. During the vesting periods, Mrs. Kiriaku will be the record owner of the restricted stock and she will be entitled to all the rights of a stockholder of the Company, including the right to vote and receive dividends or other distributions on the shares, provided, however, that dividend payments or other distributions on unvested shares shall be held in custody by the Company and subject to the same restrictions that apply to unvested shares. The shares will not be delivered until they vest, and she has no rights to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the shares until such shares vest, except as otherwise provided in the applicable grant agreement or the 2019 Plan. To the extent she forfeits shares of restricted stock for failure to satisfy and applicable vesting condition, she will no longer be entitled to any rights as a stockholder of the Company, including the rights to vote or receive dividends or other distributions on such forfeited shares.
Equity Compensation Plan Information
The following table sets forth, as of July 28, 2021,21, 2022, certain information related to our equity compensation plans.
| | | | | | | | | | | | | | | | | | | | | | | |
Plan Category | | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | |
Equity compensation plans approved by security holders | | — | | | $ | — | | | 2,591,000 | | (1) |
Equity compensation plans not approved by security holders | | — | | | — | | | — | | |
| | | | | | | |
Total | | — | | | $ | — | | | 2,591,000 | | |
(1)Consist of 2,591,000 shares, including stock options, stock appreciation rights, restricted stock and other equity-based awards, that may be awarded under the Freedom Holding Corp. 2019 Equity Incentive Plan.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes the objectives and components of our executive compensation program and compensation decisions for our named executive officers (“NEOs”) for fiscal year 2022. Our NEOs as of March 31, 2022 were:
| Number of Securitiesto Be Issued upon Exercise of Outstanding Options,Warrants and Rights
(a)
| Weighted-Average Exercise Price of Outstanding Options,Warrants and Rights
(b)
| Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column
(a))
| | |
EquityName | Title |
Timur Turlov | Chief Executive Officer and Chairman |
Askar Tashtitov | President |
Evgeny Ler | Chief Financial Officer |
Liudmila Kiriaku | Vice President of Compliance |
Executive Compensation Program Overview
Executive Compensation Philosophy and Objectives
The Company’s compensation programs are designed to align executive compensation outcomes with the Company’s commitment to execute on market leadership, revenue growth and enhanced stockholder value and returns.
FRHC is continuing to shift to a more robust pay-for-performance model that balances short- and long-term financial and business objectives with the guiding mission to provide above market shareholder returns consistent with corporate objectives and the Company’s risk framework. By extension, our executive compensation program is designed with this philosophy in mind and, thus, has the primary goal of closely aligning the interests of executives and other key employees with those of shareholders.
The compensation committee applies this philosophy with a focus on designing a competitive total compensation package that enables the Company to attract and retain qualified executives and senior management with the abilities to drive business transformation and achieve the Company's financial and business goals. Our key goal in designing our executive compensation programs is to incentivize decisions and behavior that build long-term shareholder value.
The following founding principles help guide us in designing our pay programs toward this end:
•Attract, motivate, and retain a highly qualified and experienced executive team members;
•Incentivize and reward the achievement of strategic and financial goals of the Company, with an emphasis on long-term sustainability goals;
•Utilize compensation elements that are directly linked to achievement of corporate objectives, stockholder value creation and individual performance;
•Maintain flexibility to ensure that awards remain competitive within our peer group;
•Align the interests of our executives with those of our stockholders; and
•Promote adherence to good corporate governance, company policies and values.
Executive Compensation Governance Practices
The compensation committee’s decision making reflects the following core governance principles and practices that we employ to promote our overall compensation objectives and to align executive compensation with the interests of our shareholders:
| | | | | |
WHAT WE DO |
ü | Alignment with Shareholders. Long-term incentive awards vest over a period of several years to reward sustained Company performance over time. |
| | | | | |
ü | Mix of Awards. Our executive compensation plans approved by security holders | --
| $--
| 2,598,500(1)program contains both cash and equity components and is weighted heavily towards at risk compensation for the majority of our NEOs.
|
ü | EquityPeer Group Comparison. With the help of independent compensation plans not approved by security holders
| --consultants, we annually analyze executive compensation relative to peer companies and published survey data for peer companies.
| --
| --
|
ü | | | Decisions by Independent Compensation Committee. Executive compensation is determined by our compensation committee which is comprised of only independent directors. |
ü | | | Independent Compensation Consultant. The Compensation Committee retains its own independent consultant to advise on compensation matters. |
TotalWHAT WE DO NOT DO |
X | --No Potential Payments upon Termination or Change in Control.
| -- We do not currently have any contract, agreement, plan or arrangement with any of our NEOs.
| 2,598,500
|
X | No Nonqualified Deferred Compensation. We do not have a deferred compensation program for our employees, officers or directors, including our NEOs. |
X | No Pension and Retirement Benefits. We do not offer a company-sponsored pension program or retirement benefits for our employees, officers or directors, including our NEOs. |
X | No Automatic Base Salary Increases. Our NEOs' base salaries are reviewed annually, and the decisions are based on market data provided by our independent compensation consultant. |
X | No Hedging and Pledging Company Stock. Our policies prohibit the pledging and hedging of our stock by our executives and directors. |
Elements of Our 2022 Compensation Program
Our NEO compensation program currently has three forms of direct compensation: base salary, annual cash incentive awards, and long-term incentives.Securities availableBelow is an overview of the program’s structure:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Element | | Type | | Form | | Key Characteristics | | Purpose |
| | | | | | | | |
Base Salary | | Fixed | | Cash | | Annual adjustments based on individual performance, market pay levels and internal pay equity. | | Attracts, retains and rewards NEOs by providing a competitive fixed amount of compensation for service that reflects skill, responsibility, and experience. |
| | | | | | | | |
Annual Cash Incentive | | Variable | | Cash | | Discretionary cash or equity bonuses, based on financial, strategic, and operational goals and individual performance. | | Focuses NEOs on achievement of our short-term financial, operational, strategic goals and individual goals. Aligns interests of NEOs with stockholders by promoting strong financial performance and achievement of other key corporate objectives. |
| | | | | | | | |
Long-term Equity Incentive | | Variable | | Performance-based Stock Awards | | Equity awards based on stock price performance that ratably vest over four years. | | Retains NEOs through multi-year vesting of equity awards. Motivates and rewards NEOs for the achievement of long-term corporate performance. Aligns NEOs’ interests with long-term stockholder interests. |
2022 Total Direct Compensation Mix
The compensation committee strives to achieve an appropriate mix between fixed versus variable pay and cash versus equity-based compensation awards in order to meet our compensation objectives. In determining the mix of compensation among these elements, the committee does not assign specific ratios or other relative measures that dictate the total compensation mix to be awarded or targeted to the executive team, or the portion that is either at-risk or otherwise subject to performance. Nevertheless, as illustrated by the charts below, the compensation committee structured executive
compensation in fiscal 2022 so that a significant portion of the total direct compensation of our NEOs was “at-risk” or performance-based, with the actual value realized subject to the achievement of short-term or long-term corporate and financial performance goals. By linking a significant portion of our executives’ compensation to performance, the compensation committee emphasized incentive-based variable pay, which is consistent with our pay-for-performance philosophy and creates a strong alignment with long-term stockholder value.
* 79% - Variable “At Risk” Compensation
21% - Fixed Compensation
Oversight of Executive Compensation
Role of the Compensation Committee
The compensation committee has oversight responsibility in administering and providing guidance over the Company’s executive compensation program. The following is a summary of the committee’s key responsibilities regarding executive compensation:
•To review and recommend for award underBoard approval the 2019 Plan.compensation programs for the Company’s executive officers, including the NEOs;
•To review and approve corporate goals and objectives relevant to the compensation of the NEOs and make recommendations to the Board for approval of total compensation for NEOs;
•To provide recommendations to the Board regarding compensation of FRHC’s non-employee directors; and
•To review and assess stockholders' say-on-pay and say-on-pay frequency votes and consider results of the most recent say-on-pay vote in evaluating and determining executive compensation.
Each year, the compensation committee meets to review the performance and compensation of our CEO and other NEOs. The compensation committee uses a consistent approach to determine the compensation of each NEO in order to maintain general alignment amongst the executive team. In making compensation decisions for our executives as a group, the compensation committee generally sets total compensation, including long-term incentives, based on numerous factors, including job responsibility, individual performance, company performance, competitive market pay and individual responsibilities and experience.
Role of Management
In discharging its responsibilities, the compensation committee works with management, including our CEO. Our management assists the compensation committee by providing information on corporate and individual performance, market compensation data and management’s perspective on compensation matters.
Annually, the compensation committee reviews and approves the goals and objectives applicable to the compensation of our CEO. Our CEO’s total compensation package is determined entirely by the compensation committee and approved by the Board, based on the compensation committee’s evaluation, and reflects his performance, company performance and competitive industry practices. The CEO is not present during deliberations or voting by the compensation committee on his annual compensation package.
In addition, our CEO annually evaluates each of the other NEOs and makes compensation recommendations to the compensation committee. In developing his recommendations, the CEO considers each NEOs' performance against the Company and business segment performance and against his or her individualized goals. The compensation committee has discretion in approving, disapproving or modifying any of the CEO's recommended salary adjustments or proposed awards to the other NEOs, subject to final Board approval.
Role of the Independent Compensation Consultant
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEThe compensation committee engaged NFPCC, an independent national compensation consulting firm to advise on executive and director compensation matters. NFPCC assists the compensation committee in developing a competitive and comprehensive total compensation program that is consistent with our philosophy of goal-oriented pay-for-performance and that allows us to attract, retain and motivate talented executives while remaining in line with industry comparators.For 2022, NFPCC provided various services to the compensation committee, including the design of our compensation peer group; the annual review and analysis of our NEO compensation against competitive market data based on the companies in our peer group. The compensation committee and NFPCC are currently working on the design of our future annual and long-term equity incentive plans, the review and analysis of our non-employee director compensation; and emerging compensation trends, including potential compensation plans for our 2023 fiscal year.
The compensation committee reviews NFPCC’s independence on an annual basis. For 2022, the compensation committee determined that there were no conflicts of interest as a result of any current, historical, or pending engagement.
Role of Stockholders
At the 2021 Annual Meeting, pursuant to Section 16(a)14A of the Exchange Act, requires our directorswe submitted a proposal to stockholders for an advisory and executive officers, and any persons who own more than 10%non-binding vote to approve the compensation of our common stock to file with the SEC reports of beneficial ownership and changes in beneficial ownership of our common stock. Officers and directors are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such reports furnished to us or written representations, we believe that during fiscal 2021 all filing requirements applicable to our executive officers directors and greater than 10%as disclosed in the proxy statement for the 2021 Annual Meeting. This advisory vote on executive compensation, commonly referred to as a “say-on-pay” proposal, gave our stockholders were met on a timely basis, except for a Form 3 for Ms. Williams at the time she became a director, a Form 4 for each of Mr. Tashtitov and Mr. Ler in connection with a grant of equity incentive compensation, and a Form 4 for Mr. Ler in connection with the sale of 8,471 shares in multiple trades occurringopportunity to express their views on the same day. Eachcompensation of the Form 4 filings by Mr. Tashtitov and Mr. Ler were inadvertently filed one day late.
The table below summarizes compensation paid to or earned by our named executive officersofficers. The vote was not intended to address any specific element of compensation, but rather related to the overall compensation of our named executive officers. Approximately 74% of the votes cast at our 2021 Annual Meeting were voted in favor of our executive compensation. While the voting result demonstrates a high level of support for our overall executive compensation program, the compensation committee remains dedicated to continuously improving the existing executive compensation program.
Compensation Practices Related to Risk Management
Our current compensation programs are discretionary, balanced and focused on rewarding based on performance. Under this structure, the highest amount of compensation can be achieved only through consistent superior performance over sustained periods of time. This provides strong incentives to manage the Company for the years ended March 31, 2021long term, while avoiding excessive risk-taking in the short term. Likewise, the elements of our targeted compensation are balanced among current cash payments and 2020.equity awards.
Summary Compensation Table
Name and Principal Position | | | | | | All Other Compensation ($)(2) | |
Timur Turlov | | 2021 | 279,525 | -- | -- | 22,189 | 301,714 |
CEO and Chairman(4) | | 2020 | 95,236 | -- | -- | 39,048 | 134,284 |
| | | | | | |
Evgeniy Ler | | 2021 | 180,157 | -- | -- | 25,758 | 205,942 |
CFO | | 2020 | 129,266 | -- | -- | 20,814 | 150,080 |
| | | | | | |
Askar Tashtitov | | 2021 | 154,539 | -- | -- | 22,905 | 177,443 |
President(4) | | 2020 | 131,927 | -- | -- | 21,110 | 153,037 |
The compensation committee considers risk management practices when reviewing and determining incentive compensation we provide to our NEOs. Specifically, the compensation committee reviews the Company’s overall NEO compensation structure, taking into account such factors as the overall mix of compensation, the performance measures that
Annual salary is net of all salary-related taxes and dues requiredare used under the lawsCompany’s incentive programs, the length of vesting periods where applicable, and the overall relationship of the Russian FederationCompany’s compensation programs to the Company’s business risk.
Peer Group and Benchmarking to Market
In 2022, the Republiccompensation committee, in consultation with management and with support from its independent compensation consultant, reviewed and approved a peer group that is used to provide relevant market context for the compensation committee’s decision making. The compensation committee does not apply a formulaic approach to setting the NEOs’ compensation at any specific level or percentile against the peer group described. However, the compensation committee periodically reviews peer group compensation data to assess the competitiveness of Kazakhstan,our executive compensation practices, structures and levels.
For 2022, the compensation committee utilized the peer group that was recommended by NFPCC. In general, the peer group reflected similarly sized (based on assets, market capitalization and revenue sizes as well as total shareholder return) publicly traded companies in the financial services industry (specifically including investment banking organizations). The peer group that was recommended by NFPCC, and adopted by the compensation committee, is consistent with the markets in which are legallywe operate.
The compensation committee and NFPCC reviewed the responsibilityconstruct of the Company.2022 peer group in the spring of 2022 in order to address compensation program best practices for consideration going forward. Based upon this review and market conditions, NFPCC recommended a Compensation Peer Group for implementation in 2022 to assist in identifying a range of reasonable compensation going forward.
The following illustrates NFPCC’s recommendations for the Company’s 2022 Compensation Peer Group:
| | | | | | | | |
Peer Company | Ticker | 2022 Peer Group |
B. Riley Financial, Inc. | RILY | ü |
Diamond Hill Investment Group, Inc. | DHIL | ü |
Donnelley Financial Solutions, Inc. | DFIN | ü |
FactSet Research Systems Inc. | FDS | ü |
Focus Financial Partners Inc. | FOCS | ü |
Greenhill & Co., Inc. | GHL | ü |
MarketAxess Holdings Inc. | MKTX | ü |
Moelis & Company | MC | ü |
Morningstar, Inc. | MORN | ü |
Open Lending Corporation | LPRO | ü |
Oppenheimer Holdings Inc. | OPY | ü |
Piper Sandler Companies | PIPR | ü |
PJT Partners Inc. | PJT | ü |
Robinhood Markets, Inc. | HOOD | ü |
Victory Capital Holdings, Inc. | VCTR | ü |
2022 Components of Executive Compensation
The three key elements of our executive compensation program are (i) base salary, (ii) annual short-term cash incentives, and (iii) long-term incentives.
(2)
Includes salary-related taxes and dues, including mandatory contributions to nationally-sponsored pension programs of $17,534 and $17,654, and a car and travel allowance of $4,655 and $21,394 for Mr. Turlov during the fiscal years ended March 31, 2021 and 2020, respectively, salary-related taxes and dues, including mandatory contributions to nationally-sponsored pension programs of $25,785 and $20,814 for Mr. Ler during the fiscal years ended March 31, 2021 and 2020, respectively, and salary-related taxes and dues, including mandatory contributions to nationally-sponsored pension programs of $22,905 and $21,110 for Mr. Tashtitov during the fiscal years ended March 31, 2021 and 2020, respectively.27
(3)
Mr. Turlov receives compensation in both Russian rubles and Kazakhstani tenge. Mr. Ler and Mr. Tashtitov are paid in Kazakhstani tenge. The U.S. dollar amounts shown in the table above were calculated using the average annual exchange rates for the period from April 1, 2020 to March 31, 2021, of Kazakhstani tenge to Russian ruble and Russian ruble to U.S. dollar as reported by the Central Bank of Russia.
(4)
Mr. Turlov and Mr. Tashtitov are also Company directors. They receive no compensation for their service on our Board.
Employment Agreements
At this time Freedom Holding Corp does not have employment agreements with Mr. Turlov, Mr. Ler or Mr. Tashtitov. Mr. Turlov has a standard statutorily required employment agreement for all employees in the Russian Federation with Freedom RU and a standard statutorily required employment agreement for all employees in the Republic of Kazakhstan with our subsidiary Freedom Finance Global PLC (“Freedom Global”). Mr. Ler and Mr. Tashtitov have standard statutorily required employment agreement for all employees in the Republic of Kazakhstan with our subsidiary Freedom KZ. These standard statutorily required employment agreements primarily provide for statutory rights relating to employees, employers, base salary, and payment of salary-related taxes and dues, including personal income taxes and pension fund obligations. Each of Mr. Turlov, Mr. Ler and Mr. Tashtitov provide services to the Company on an at-will basis.
Base Salary
We provideThe compensation committee annually reviews executive officer base salary levels, typically at the beginning of the year, with a goal of providing competitive, fixed cash compensation. The compensation committee generally seeks to maintain executive base salaries as a fixed sourcenear the median level of compensationsalaries for our named executive officers, allowing them a degree of certainty with respect to their day-to-day compensation. Base salaries of our named executive officers are reviewed periodically by ourcomparable positions in the peer group. As such, the compensation committee based on performance, scope of responsibilities and market information. approved the following NEO base salaries for fiscal 2022:
| | | | | | | | |
Name | 2022 Base Salary(1) | 2022 Adjusted Base Salary(2) |
Timur Turlov | $1,200,000 | $1,235,306 |
Askar Tashtitov | $300,000 | $292,436 |
Evgeny Ler | $300,000 | $292,436 |
Liudmila Kiriaku(3) | $133,944 | $100,397 |
(1)In accordance with the laws of the Russian Federation and the Republic of Kazakhstan,countries where our NEOs are employed, salaries are net of all salary-related taxes, dues and state sponsored pension plans, which are the legal responsibility of the employer in those countries. Mr. Turlov’s
(2)Base salary is paid to our NEOs in currencies other than the U.S. dollar, including Kazakhstan tenge, Russian rubles and the Euro. Actual amounts paid to our NEOs have been adjusted to reflect currency fluctuations during fiscal 2022.
(3) Mrs. Kiriaku’s annual base salary includes salary paidis denominated in Euros and has been converted to himU.S. dollars based on the closing Euro/USD exchange rate on March 31, 2022, of 1.1162 Euros per U.S. dollar as reported by Freedom RU and Freedom Global. Mr. Ler and Mr. Tashtitov receive base salaries from Freedom KZ.
During the fiscal year, the compensation committee evaluated the performance and scopeYahoo! Finance. Mrs. Kiriaku began serving as VP of responsibilities of Messrs. Turlov, Ler and Tashtitov, as well as compensation information of other financial services companies and companies with market caps similar to thoseCompliance of the Company. Based on this evaluation,Company in October 2021. Prior to that time she was employed by a Company subsidiary. Her 2022 adjusted base salary reflects her total base salary for the compensation committee recommended to our Board and our Board approved increases in the annual salaries for each of Messrs. Turlov, Ler and Tashtitov. Mr. Turlov’s annual salary was increased to $1,200,000 commencing from February 1, 2021. The annual salaries of each of Mr. Ler and Mr. Tashtitov were increased to $300,000 commencing from March 1, 2021. Consistent with local regulations, salary amounts are net of all salary-related taxes.full 2022 fiscal year.
Annual Incentive Compensation
From timeOur NEOs are eligible to time, we may award incentive compensation in the form ofearn an annual short-term cash or equity to our employees, including our named executive officers,incentive designed to compensate them for Company performancereward and their contributions to Company success. promote achievement of the Company’s short-term business objectives and enhance stockholder value. For 2022, short-term cash incentives were discretionary in nature.
In February 2021, the compensation committee and the Board approved incentive compensation awards to each of Messrs. Tashtitov and Ler. Mr. Tashtitov was eligible to receive cash compensation of up to $400,000 based on achievement of investment banking performance and business development objectives during fiscal 2022. Mr. Ler and Mr. Tashtitov for our 2022 fiscal year. Mr. Ler iswas eligible to receive cash or equity compensation of up to $300,000 based on achievement of financial reporting performance objectives during fiscal 2022. Mr. Tashtitov is eligibleNo changes to receivebase salary or new awards have yet been made for fiscal 2023, but the compensation committee reserves the right to make changes to base salary and/or make discretionary cash bonus and/or equity compensationincentive awards for the 2023 fiscal year.
Actual 2022 Annual Incentive Awards
To receive a payout, an NEO must be an employee during the fiscal year that the bonus payment is earned and subsequently when the bonus payment is payable. The following table shows the actual 2022 Annual Incentive Award paid to each NEO serving as of upMarch 31, 2022:
| | | | | | | | | | | | | | | | | |
Name | 2022 Adjusted Base Salary | Maximum ($) | Total Actual Bonus Payout(2) | Actual as a % of Maximum | Actual as a % of Salary |
Timur Turlov(1) | $1,235,306 | N/A | N/A | N/A | N/A |
Askar Tashtitov(1) | $292,436 | $400,000 | $417,701 | 104% | 135% |
Evgeny Ler(1) | $292,436 | $300,000 | $316,585 | 106% | 108% |
Liudmila Kiriaku(3) | $100,397 | N/A | N/A | N/A | N/A |
(1)Base salary is paid to $400,000 based on achievement of investment banking performance and business development objectivesour NEOs in currencies other than the U.S. dollar. Base salaries paid to our NEOs has been adjusted to reflect currency fluctuations during fiscal 2022.
(2) Bonus payouts to our NEOs in 2022 were paid in currencies other than the U.S. dollar. Bonuses were paid out at the maximum. Bonus payout amounts have been adjusted to reflect the impact of currency fluctuations during fiscal 2022.
(3) Mrs. Kiriaku began serving as the Company’s VP of Compliance in October 2021. As such, no bonus was awarded to her for fiscal 2022. Mrs. Kiriaku is also paid in currencies other than the U.S. dollar and Mr. Tashtitov wereher salary payments are also each awarded long-termsubject to currency fluctuation.
Long-term Incentive Awards
From time to time, we may award equity incentive compensation into our employees, including our NEOs, designed to compensate them for Company performance and their contributions to Company success. The compensation committee determines the form of a restricted stock grant of 6,621 shares of our common stock. Vestingamount of these sharesawards, as well as the mix or weighting of these awards. When considering the total long-term equity-based incentive award amount granted to each is subjectNEO, the compensation committee generally reviews the comparison to the peer group, the relative value of each remaining in Continuous Service (defined below) withcompensation element, the Company through March 31, 2022. Basedexpense of such awards, and the impact on the closing market price of the Company’s common stock on May 18, 2021, the date we finalized agreements with Mr. Ler and Mr. Tashtitov relating to these grants, the restricted stock grant to each of them was valued at approximately $300,000.
dilution.
On May 18, 2021, Mr.the compensation committee approved discretionary grants to Messrs. Tashtitov and Ler of 6,621 shares of common stock each. The awards were subject to time-based restrictions of a continuation of service through the vesting date, which served as retention incentive. These grants vested in the full amount to Messrs. Tashtitov and Ler on March 31, 2022.
No grant has been made to any of our NEOs in 2022 for fiscal year 2023 at this time, but the compensation committee reserves the right to make grants for the 2023 fiscal year.
Performance-based Restricted Stock
Restricted stock awards granted in May of 2021 to Messrs. Tashtitov and Ler, vest as reflected in the Restricted Stock Vesting Schedule table below. In connection with her appointment as the VP of Compliance, Mrs. Kiriaku received a discretionary grant approved by compensation committee. The awards include a mixture of time-based restrictions which provide a retention incentive, and performance-based restrictions, which provide both a retention incentive and tie compensation to stock price performance. This award vests as reflected in the Restricted Stock Vesting Schedule table below.
The awards to Messrs. Tashtitov and Ler and Mr. Tashtitov were also awarded restricted stock grants of 33,379 shares and 46,379, respectively. Vesting of these grants isMrs. Kiriakuare subject to (i)both continuous service through each individually remaining in Continuous Service with us through the applicable vesting dates set forth in the vesting schedule below,period and satisfaction of the Continuous Service requirement notwithstanding, and (ii)stock price considerations. With regards to stock price performance, if the weighted average closing price of our common shares for the 20 trading days prior to the first vesting date is less than 70% of the closing price of the common shares on the grant date (May 18, 2021), and as to any subsequent vesting date, if the weighted average closing price of our common shares for the 20 trading days prior to the vesting date is less than 70% of the weighted average closing price of the common shares on the immediately prior vesting date, then the common shares scheduled to vest on the vesting date shall not vest but shall be automatically forfeited on the stated vesting date and we shall have no further obligations as to any portion of the restricted stock award forfeited.
In an effort to better align executive officer compensation with shareholder interests and motivate management to increase Company performance, our restricted stock includes an annual performance period and a single award opportunity at the end of each annual performance period.The following tables details the total grant opportunity for the grants described above:
| | | | | | | | | | | |
Executive | 2022 Adjusted Base Salary | Restricted Stock (Grant Date Fair Value) |
Award Value | # of Shares |
Timur Turlov | $1,235,306 | N/A | N/A |
Askar Tashtitov | $292,436 | $2,101,432 | 46,379 |
Evgeny Ler | $292,436 | $1,512,402 | 33,379 |
Liudmila Kiriaku | $100,397 | $459,325 | 7,500 |
Restricted Stock Vesting Schedule
The following tables details the four year ratable vesting schedule for restricted stock grants made to Messrs. Tashtitov and Ler are scheduled to vest upon satisfaction of the vesting conditions, as follows:stock:
| |
Vesting Date | | |
May 18, 2023 | 14,579 | 9,379 |
May 18, 2024 | 10,600 | 8,000 |
May 18, 2025 | 10,600 | 8,000 |
May 18, 2026 | 10,600 | 8,000 |
"Continuous Service" means the individual’s service with the Company, whether as an employee, consultant or director, is not interrupted or terminated. The individual’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the individual renders service to the Company as an employee, consultant or director or a change in the entity for which the individual renders such service, provided that there is no interruption or termination of the individual’s Continuous Service. The compensation committee, or its delegate, in its sole discretion, may determine whether Continuous Service will be considered interrupted, and whether a Company transaction, such as a sale or spin-off of a division or subsidiary that employs an individual shall be deemed to result in termination of Continuous Service. If the individual’s Continuous Service terminates for any reason at any time before all of the individual’s restricted stock grant has vested, the unvested restricted stock shall be automatically forfeited upon such termination of Continuous Service and we shall have no further obligations to the individual under the grant agreement, unless otherwise determined by the compensation committee.
Outstanding Equity Awards at Fiscal Year-End
As of the fiscal year ended March 31, 2021, none of our named executive officers held any outstanding equity awards. Subsequent to the fiscal year-end, Mr. Ler and Mr. Tashtitov were awarded equity incentive compensation awards as described above under the heading “Incentive Compensation”.
Option Exercises and Stock Vested
As of the fiscal year ended March 31, 2021, none of our named executive officers held any unexercised stock options or unvested restricted stock awards. Subsequent to the fiscal year-end, Mr. Ler and Mr. Tashtitov were awarded equity incentive compensation awards as described above under the heading “Incentive Compensation”.
| | | | | | | | | | | |
Vesting Date | Restricted Stock (Vesting Schedule) |
Askar Tashtitov | Evgeny Ler | Liudmila Kiriaku |
May 18, 2023 | 14,579 | 9,379 | 3,000 |
May 18, 2024 | 10,600 | 8,000 | 1,500 |
May 18, 2025 | 10,600 | 8,000 | 1,500 |
May 18, 2026 | 10,600 | 8,000 | 1,500 |
Nonqualified Deferred Compensation
We do not have a deferred compensation program for our employees, officers or directors, including our named executive officers.
NEOs.
Pension and Retirement Benefits
We do not offer a company-sponsored pension program or retirement benefits for our employees, officers or directors, including our named executive officers.NEOs. Several of the countries in which we operate have nationally sponsored pension programs to which we are required to make contributions. Such contributions are paid by us to the government on behalf of the employee. We do not have other liabilities related to any supplementary pensions, post-retirement health care, insurance benefits or retirement indemnities.
Potential Payments upon Termination or Change in Control
We do not currently have any contract, agreement, plan or arrangement with any of our named executive officersNEOs that would result in any potential payment upon resignation, retirement or other termination of employment with the Company or as a result of a change in control of the Company or change of responsibilities in the event of a change in control of the Company.
Compensation Committee Report
Advisory VoteThe compensation committee has reviewed the preceding Compensation Discussion and Analysis and discussed its contents with FRHC management. Based on Executivethe review and discussions, the Compensation
At Committee has recommended to the 2018 Annual Meeting, pursuant to Section 14A of the Exchange Act, we submitted a proposal to stockholders for an advisoryBoard that this Compensation Discussion and non-binding vote to approve the compensation of our executive officers as disclosedAnalysis be included in the proxy statementProxy Statement and, through incorporation by reference, in our Annual Report on Form 10-K for the 2018 Annual Meeting. This advisory vote on executiveyear ended March 31, 2022.
Compensation Committee
Jason Kerr, Chair
Len Stillman
Boris Cherdabayev
Summary Compensation Table
The table below summarizes compensation commonly referredpaid to as a “say-on-pay” proposal, gave our stockholders the opportunity to express their views on the compensation of our named executive officers. The vote was not intended to address any specific element of compensation, but rather related to the overall compensation of our named executive officers. At the 2018 Annual Meeting, our stockholders approved the compensation of our named executive officers with approximately 77% of the vote cast in favor.
PROPOSAL TWO — ADVISORY AND NON-BINDING VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATIONIn accordance with Section 14A of the Exchange Act, we provide our stockholders with the opportunity to vote to approve, on an advisory and non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC once every three years. The next advisory and non-binding vote to approve named executive officer compensation will be held at our 2024 annual meeting of stockholders.
Our executive compensation programs are designed to attract, motivate, and retain our named executive officers, who are critical to our success, and to rewardor earned by our named executive officers for the achievementfiscal years ended March 31, 2022, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($)(1) | | Bonus ($) | | Stock Awards ($) | | All Other Compensation ($)(2) | | Total ($)(3) |
Timur Turlov | | 2022 | | 1,235,306 | | | — | | | — | | | 19,708 | | | 1,255,014 | |
CEO and | | 2021 | | 279,525 | | | — | | | — | | | 22,189 | | | 301,714 | |
Chairman(4) | | 2020 | | 95,236 | | | — | | | — | | | 39,048 | | | 134,284 | |
Askar Tashtitov | | 2022 | | 292,436 | | | 417,701 | | | 797,068 | | | 90,477 | | | 1,597,652 | |
President(4) | | 2021 | | 154,539 | | | — | | | — | | | 22,905 | | | 177,443 | |
| | 2020 | | 131,927 | | | — | | | — | | | 21,110 | | | 153,037 | |
Evgeny Ler | | 2022 | | 292,436 | | | 316,585 | | | 601,561 | | | 77,726 | | | 1,228,307 | |
CFO | | 2021 | | 180,157 | | | — | | | — | | | 25,758 | | | 205,942 | |
| | 2020 | | 129,266 | | | — | | | — | | | 20,814 | | | 150,080 | |
Liudmila Kiriaku | | 2022 | | 100,397 | | | — | | | 808 | | | 33,710 | | | 134,916 | |
VP of Compliance(5) | | | | | | | | | | | | |
(1)Annual salary is net of strategicall salary-related income taxes, mandatory contributions to the nationally-sponsored pension program, social insurance and operational goalsobligatory medical insurance required under the laws of the Russian Federation, the Republic of Kazakhstan and the achievementRepublic of increasedCyprus, which are legally the responsibility of the employer for all employees in those countries, not just our NEOs.
(2)Includes: (i) salary-related income taxes, mandatory contributions to the nationally-sponsored pension program, social insurance and obligatory medical insurance of $9,972, $17,534 and $17,654, and a car and travel allowance of $9,736, $4,655 and $21,394, for Mr. Turlov during the fiscal years ended March 31, 2022, 2021 and 2020, respectively; (ii) salary-related income taxes, mandatory contributions to the nationally-sponsored pension program, and social insurance of $90,447, $22,905 and $21,110 for Mr. Tashtitov during the fiscal years ended March 31, 2022, 2021 and 2020, respectively; (iii) salary-related income taxes, mandatory contributions to the nationally-sponsored pension program, and social insurance of $77,726, $25,785 and $20,814 for Mr. Ler during the fiscal years ended March 31, 2021 and 2020, respectively, (iv) salary-related income taxes, social insurance and obligatory medical insurance of $14,967, $16,384 and $2,359 for Mrs. Kiriaku during the fiscal year ended March 31, 2022.
(3)Mr. Turlov receives compensation in both Russian rubles and Kazakhstan tenge. Mr. Ler and Mr. Tashtitov are paid in Kazakhstan tenge. Mrs. Kiriaku is paid in both Euros and tenge. The U.S. dollar amounts shown in the table above were calculated using the average annual exchange rates for the period from April 1, 2020 to March 31, 2022, of Kazakhstan tenge to Russian ruble, Russian ruble to U.S. dollar and the Euro to U.S. dollar as reported by the Central Bank of Russia.
(4)Mr. Turlov and Mr. Tashtitov are also Company directors. They receive no compensation for their service on our Board.
(5)Ms. Kiriaku began serving as VP of Compliance of the Company in October 2021, but was employed by a Company subsidiary prior to October 2021. The compensation amounts reflect her total stockholder returns. We seekcompensation for the full 2022 fiscal year.
Grants of Plan-Based Awards
The table below provides information regarding the grants of plan-based awards made to the named executive officers during the fiscal year ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Name | | Grant date | | All other stock awards: Number of shares of stock (#) | | Grant date fair value of stock awards ($)(4) |
Timur Turlov(1) | | 05/18/2021 | | — | | | — | |
Askar Tashtitov(2) | | 05/18/2021 | | 46,379 | | | 2,101,432 | |
Askar Tashtitov(3) | | 05/18/2021 | | 6,621 | | | 299,998 | |
Evgeny Ler(2) | | 05/18/2021 | | 33,379 | | | 1,512,042 | |
Evgeny Ler(3) | | 05/18/2021 | | 6,621 | | | 299,998 | |
Liudmila Kiriaku | | 03/30/2022 | | 7,500 | | | 459,325 | |
(1) Mr. Turlov did not receive an equity incentive award for fiscal 2022 as he, the compensation committee and the Board believe his approximately 71.2% ownership of the Company provides sufficient incentive to align his interest with those of the interestsCompany and our shareholders. This decision does not preclude Mr. Turlov from receiving equity incentive awards in the future.
(2) On May 18, 2021, the compensation committee approved discretionary grants of performance-based restricted stock awards to Messrs. Tashtitov and Ler.
(3) On May 18, 2021, the compensation committee approved discretionary equity grants to Messrs. Tashtitov and Ler. The awards vested in full on March 31, 2022.
(4)Reflects the grant date fair value of awards as determined pursuant to FASB ASC Topic 718. For valuation assumptions of the awards, see Note 25 to the consolidated financial statements in our 2022 Annual Report on Form 10-K.
Outstanding Equity Awards at Fiscal Year-End
The table below provides certain information concerning stock awards held by the named executive officers that were outstanding as of March 31, 2022. None of our named executive officers withheld outstanding stock options as of March 31, 2022.
| | | | | | | | | | | | | | |
| | Stock Awards |
| | Number of shares or units of stock that have not vested | | Market value of shares or units of stock that have not vested |
Name | | (#)(1) | | ($)(2) |
Timur Turlov | | — | | | — | |
Askar Tashtitov | | 46,379 | | | 2,764,188 | |
Evgeny Ler | | 33,379 | | | 1,989,388 | |
Liudmila Kiriaku | | 7,500 | | | 447,000 | |
(1)The outstanding stock awards as of March 31, 2022 are subject to vesting. For additional details regarding the interestsvesting conditions and vesting schedule of these stock awards see “Performance-based Restricted Stock” and “Restricted Stock Vesting Schedule” above.
(2)The market value for unvested stock awards is based on the closing price of the common stock as of March 31, 2022, which was $59.60, and is rounded to the nearest dollar.
Option Exercises and Stock Vested
The table below provides certain information concerning restricted stock awards that vested during the fiscal year ended March 31, 2022. No options were exercised by any of our stockholders. OurNEOs during fiscal 2022.
| | | | | | | | | | | | | | |
| | Stock Awards |
| | Number of shares acquired on vesting | | Value realized on vesting |
Name | | (#) | | ($)(1) |
Timur Turlov | | — | | | — | |
Askar Tashtitov | | 6,621 | | 394,612 |
Evgeny Ler | | 6,621 | | 394,612 | |
Liudmila Kiriaku | | — | | | — | |
(1) The value realized is based on the closing price of the common stock on the vesting date, March 31, 2022, of $59.60, and is rounded to the nearest dollar.
Executive Employment Agreements
At this time Freedom Holding Corp does not have employment agreements with Messrs. Turlov, Tashtitov or Ler. Mr. Turlov has a standard statutorily required employment agreement for all employees in the Russian Federation with Freedom RU and a standard statutorily required employment agreement for all employees in the Republic of Kazakhstan with our subsidiary Freedom Finance Global PLC (“Freedom Global”). Mr. Tashtitov and Mr. Ler have standard statutorily required employment agreement for all employees in the Republic of Kazakhstan with our subsidiary Freedom KZ. These standard statutorily required employment agreements primarily provide for statutory rights relating to employees, employers, base salary, and payment of salary-related taxes and dues, including personal income taxes and pension fund obligations. Each of Messrs. Turlov, Tashtitov and Ler and Mrs. Kiriaku provide services to the Company on an at-will basis.
Pay Ratio Disclosure
We are required to calculate and disclose the total compensation committee reviews named executive officerpaid to our median employee, as well as the ratio of total compensation paid to ensure such median employee as compared to total compensation paid to our CEO pursuant to Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K. We believe the ratio of pay included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices.
We determined total compensation awarded to our goals.
This vote is advisory, which means that the voteglobal employees based on executivecash compensation is not binding on us, our Board, or our compensation committee. The vote on this resolution is not intended to address any specific element of compensation, but rather relates to the overall compensationrates of our named executive officers,employees who are paid in foreign currencies, which we converted into U.S. dollars using the average annual foreign exchange conversion rate for salary paid during the year and the rate in effect on March 31, 2022, for incentive awards related to year-end compensation.
As of March 31, 2022, we had 3,421 employees in the following countries: Russia 1,717, Kazakhstan 1,337, Ukraine 139, Cyprus 94, Uzbekistan 61, the U.S. 16, Germany 14, Azerbaijan 12, Kyrgyzstan 10, Armenia 8, the UK 5, Greece 3, Spain 3 and France 2. In determining the median employee, we did not include employees from the following countries as describedthey represented, in this proxy statement. Becauseaggregate, less than 5% of our employee population:
•Uzbekistan - 61 employees
•U.S. - 16 employees
•Germany - 14 employees
•Azerbaijan - 12 employees
•Kyrgyzstan - 10 employees
•Armenia - 8 employees
•UK - 5 employees
•Greece - 3 employees
•Spain - 3 employees
•France - 2 employees
After excluding our CEO and employees located in the countries listed above, we valuedetermined our stockholders’ views on named executive officermedian employee from a population of 3,286 employees.
The fiscal 2022 total compensation andfor Mr. Turlov, our CEO, as a matter of good corporate governance, toreported in the extent there is a significant vote against our named executive officer compensation as disclosedSummary Compensation Table in this proxy statement, was $1,255,014.The fiscal 2022 annual compensation for our median employee, determined in accordance with the requirements for determining total compensation committee will consider such as a direction to the Board and the compensation committee to evaluate our named executive officer compensation practices and to determine what actions may be necessary to address our stockholders’ concerns.
Accordingly, we ask you to vote on the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table was $11,020. The ratio of our CEO’s annual total compensation to the annual total compensation of our median employee for fiscal 2022 is 114 to 1.
This pay ratio information was developed and the other related tables and disclosure.”is being provided solely to comply with specific legal requirements. We do not use this information in making compensation decisions or in running our Company.
| | THE BOARD RECOMMENDS THAT YOU VOTE “FOR” APROVAL OF THE NON-BINDING ADVISORY RESOLUTION REGARDING COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THE PROXY STATEMENT |
INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL THREE — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board, uponOn July 28, 2022, WSRP, LLC (“WSRP”), the recommendationindependent registered public accounting firm of the Company notified the Company that it was declining to stand for reappointment to conduct the audit committee,of the Company’s financial statements for the fiscal year ending March 31, 2023. WSRP has appointedinformed the Company that it will continue to perform services for the Company in connection with the fiscal quarter ending June 30, 2022. The Company is currently engaged in a search for a replacement for WSRP LLCand plans to serve as ourengage a suitable independent registered public accounting firm within a timely fashion. Therefore, the Board is not recommending an independent registered public accounting firm for ourelection, approval or ratification of Company shareholders at the 2022 Annual Meeting.
WSRP’s audit reports on the Company’s consolidated financial statements as of and for the fiscal year.years ended March 31, 2022 and 2021, did not contain any adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended March 31, 2022 and 2021, and the subsequent interim period through July 28, 2022, there were no disagreements between the Company and WSRP LLC servedon any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedure, which disagreements, if not resolved to the satisfaction of WSRP, would have caused WSRP to make reference to the subject matter of the disagreements in connection with its reports on the Company’s financial statements for such periods.
During the fiscal years ended March 31, 2022 and 2021, and during the subsequent period through July 28, 2022, there were no “reportable events”, as our independent registered public accounting firm for our 2021 fiscal year.
defined in Regulation S-K Item 304(a)(1)(v).
A representative of WSRP LLC is expected towill not be present virtually at the Annual Meeting and is expected to be available to respond to appropriate questions. The representative will also have an opportunity to make a statement if he desires to do so.
We are asking our stockholders to ratify the selection of WSRP, LLC as our independent registered public accounting firm. Although ratification is not required by our By-Laws or otherwise, the Board is submitting the selection of WSRP, LLC to our stockholders for ratification as our audit committee has recommended because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate practice. If our stockholders fail to ratify the selection, we will consider that failure as a direction to the Board and the audit committee to consider the selection of a different firm. Even if the selection is ratified, the audit committee in its discretion may select a different independent registered public accounting firm, at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
Meeting.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pre-Approval of Services
The audit committee annually engages our independent registered public accounting firm and pre-approves their services related to the annual audit and interim quarterly reviews of our financial statements and all reasonably related assurance services. All non-audit services are also considered for pre-approval by the audit committee. Audit committee pre-approval of audit and non-audit services is not required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by the audit committee regarding our engagement of the independent registered public accounting firm.
Audit Fees
The firm of WSRP, LLC has served as our independent registered public accounting firm for the fiscal years ended March 31, 20212022 and 2020.2021. Principal accounting fees for professional services provided to us by WSRP, LLC for the fiscal years ended March 31, 20212022 and 20202021 are summarized as follows:
| | | | | | | | | | | | | | |
Fee Type | | For the year ended March 31, 2022 ($) | | For the year ended March 31, 2021 ($) |
Audit fees | | 1,655,302 | | | 1,168,117 | |
Audit-related fees | | 1,313 | | | 7,963 | |
Tax fees | | — | | | 175 | |
All other fees | | 14,825 | | | — | |
Total | | 1,671,440 | | | 1,176,254 | |
| For the year ended March 31, 2021 ($) | For the year ended March 31, 2020 ($) |
Audit fees | 1,168,117 | 1,010,527 |
Audit-related fees | 7,963 | 42,660 |
Tax fees | 175 | 1,287 |
| -- | --- |
Total | 1,176,254 | 1,054,473 |
Audit Fees. Audit fees were for professional services rendered in connection with the audit of the financial statements included in our annual report on Form 10-K and review of the financial statements included in our quarterly reports of Form 10-Q and for services normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements and fees for Sarbanes-Oxley 404 audit work.
Audit-Related Fees. Audit-related fees during the fiscal years ended March 31, 20212022 and 2020,2021, were primarily fees billed for professional services related to foreign statutory reporting and document review.
Tax Fees. Fees billed for professional services rendered for tax compliance, tax advice and tax planning within the United States for the fiscal years ended March 31, 20212022 and 2020.2021.
All of the services provided by WSRP, LLC described above were approved by our audit committee pursuant to our audit committee’s pre-approval policies.
The audit committee has determined that the provision of services by our independent registered accounting firm described above iswere compatible with WSRP, LLC maintaining WSPR, LLC’sits independence.
| | THE BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF WSRP, LLC AS OUR INDEPENDENT REGISTERED ACCOUNTING FIRM FOR THE 2022 FISAL YEAR. |
CERTAINCERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONSReview, Approval or Ratification of Transactions with Related Persons
In accordance with our Audit Committee Charter, our audit committee, all members of which are independent, is responsible for reviewing, approving and overseeing any transaction between the Company, including its subsidiaries, and any related person (as defined in Item 404 of SEC Regulation S-K) and any other potential conflict of interest situations on an ongoing basis. Item 404 identifies a “related person” as any person who is: (i) an executive officer, director or nominee for director of the registrant; (ii) any holder of greater than 5% of any class of the registrant’s voting securities; and (iii) any immediate family member of any of the foregoing. Consistent with the requirements of the Audit Committee Charter and the Company’s policies and procedures, at least quarterly the audit committee reviews, and as appropriate approves or ratifies, all transactions in which a related party may have a direct or indirect material interest in which the amount involved in such transaction or proposed transaction would exceed $120,000 in a single year. Based on all the relevant facts and circumstances, the audit committee decides whether a related-person transaction is appropriate, and in our best interests, and conforms with SEC rules prohibiting personal loans to executive officers and directors. At least quarterly the audit committee also monitors ongoing, previously-approved or ratified transactions with related parties.
Transactions with Related Persons
In addition to the compensation arrangements discussed above underin “Executive Compensation” elsewhere in this proxy statement, the following is a description of transactions between the Company and related persons since April 1, 2020,2021, that exceeded or are anticipated to which we have beenexceed $120,000 in a participant, in which the amount involved in the transaction exceeds or will exceed the lesser of (i) $120,000 or (ii) 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest or such other persons as may be required to be disclosed pursuant to Item 404 of Regulation S-K, which we refer collectively to as “related persons”.single year.
Certain of our executive officers, directors, greater than 5% stockholders and persons or entities affiliated with them have brokerage, banking and/or other discretionary accounts with our subsidiary companies and engage in transactions with those entities in the ordinary course of business involving brokerage, banking and investment banking services. Such transactions are made on substantially the same terms and conditions as otherthose prevailing at the time for comparable transactions with similarly situated unaffiliated third parties.customers and eligible employees. In connection with these accounts, our subsidiaries may extend credit in the ordinary course of business to certain of our directors, executive officers, greater than 5% stockholders and persons or entities affiliated with them. These extensions of credit may be in connection with margin lending or other extensions of credit by our subsidiaries in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable extensions of credit with similarsimilarly situated unaffiliated third parties and do not involve more than the normal risk of collectability or present other unfavorable features.
Transactions with Timur Turlov
Since November 2015 Timur Turlov has been our controlling shareholder and served as a memberDuring fiscal 2022 we derived approximately $308.9 million, or approximately 71.5%, of our Boardtotal fee and as our CEO. In July 2014commission income from entities owned or controlled by Mr. Turlov, created and has remained the sole owner ofincluding approximately $306.3 million from FFIN Brokerage Services, Inc. (“FFIN Brokerage”) and its customers, $916 from Freedom Mobile World, $634 from Mr. Turlov personally, $589 from Life Insurance Company Freedom Finance Life JSC (“Freedom Life”), $321 from Insurance Company Freedom Finance Insurance JSC(“Freedom Insurance”) and $108 from Microfinance organization Freedom Finance Credit (“FFIN Credit”). Also, during fiscal 2022 we paid commission expense to FFIN Brokerage of approximately $9.4 million and earned interest income of approximately $2.7 million. We also paid approximately $206 thousand in interest expense to FFIN Credit. The foregoing transactions were performed in the ordinary course of our brokerage and banking businesses and such transactions were made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with similarly unaffiliated third parties.
FFIN Brokerage Services, Inc.
FFIN Brokerage is a corporation registered in and licensed as a broker dealer in Belize (“to service the investment needs of customers desiring broader investments options in international securities markets. FFIN Brokerage”). ManyBrokerage was formed in 2014 and is owned personally by Mr. Turlov; it is not part of our clients are also clientsgroup of FFIN Brokerage. In Eurasia, as a foreign broker dealer,companies. FFIN Brokerage has been ableits own brokerage customers, which include individuals, some entities and three institutional market-makers. FFIN Brokerage holds four transparent omnibus brokerage account holder with Freedom EU. The majority of the order flow from FFIN Brokerage relates to customer activities within the FFIN Brokerage’s omnibus accounts. We estimate that more than 40% of FFIN Brokerage's customers also hold brokerage accounts with us through our brokerage subsidiaries. Our relationship with FFIN Brokerage has also provided us and our customers with a substantial liquidity pool for trading. We expect FFIN Brokerage will continue to process brokerage transactions for its customers through us, so long as such business is not prohibited by U.S., UK, or EU sanctions or prohibited by Russian counter sanctions. To date, the government of Belize has not issued any economic sanctions against Russia or any other jurisdiction.
Freedom Insurance Companies
In May 2022 we Freedom Life, a life insurance company and Freedom Insurance, a direct insurance carrier, excluding life, health and medical, from Mr. Turlov. We acquired these companies from him at the historical cost he paid plus amounts he contributed as additional paid in capital since his initial purchase. The purchase price for Freedom Insurance was $12.4 million and the purchase price for Freedom Life was $12.1 million. We are required to make payment to Mr. Turlov for the two insurance companies no later than September 16, 2022.
Microfinance organization Freedom Finance Credit
During the year ended March 31, 2022, Bank Freedom Finance Kazakhstan JSC, our Kazakhstan bank subsidiary, (“Freedom Bank KZ")purchased retail loans at a discount to their nominal value from FFIN Credit, an entity related to Timur Turlov. FFIN Credit is a non-bank credit institution that issues loans in Kazakhstan under simplified lending procedures. FFIN Credit was created as a pilot project to test and improve the scoring models used for qualifying and issuing loans. The principal operation of FFIN Credit is to provide easier accessloans to customers online using biometric identification
and its proprietary scoring process. It is anticipated that ownership of FFIN Credit will be transferred to Freedom Bank KZ. During the U.S. securities markets, which conduct businessyear ended March 31, 2022, Freedom Bank KZ purchased loans in U.S. dollars,the aggregate amount of $59.8 million and sold back loans totaling $12.1 million to investors in Russia and Kazakhstan, due to local regulations that imposed restrictions on foreign currency accounts, required mandatory securities custody in-country, and limited access to foreign securities, unless listed on local exchanges. Over the past few years, the securities markets in Russia and Kazakhstan have developed substantially and manyFFIN Credit under certain guarantee provisions of the barriers to open access to foreign securities and foreign stock markets have been reduced or eliminated. However, since 2015 our subsidiaries haveloan purchase agreements.engaged in ordinary course brokerage, banking, lending, trading and other
Transaction with Askar Tashtitov
In July 2021 we were required by Ukrainian financial services with FFIN Brokerage. All such transactions are conducted in the ordinary courseregulators to sell 23.88% of our business. Such transactions are conducted on substantially the same terms as those prevailing at the time for comparable transactions with similarly situated unaffiliated third parties.
To comply with certain foreign ownership restrictions relating to registered Ukrainian broker-dealers, on August 24, 2019, we sold 67.12% of the outstanding equity interest ofin our Ukrainian broker-dealer subsidiary, LLC Freedom Finance Ukraine LLC (“Freedom UA”) to Askar Tashtitov, our president. Duepresident, to recent amendments by regulators to further restrict foreign ownership of registered Ukrainian broker-dealers, in July 2021 we were required to sell an additional 22.88% of the outstanding equity interests in Freedom UA to Mr. Tashtitov, reducingreduce our ownership interest in that subsidiary to approximately 9% to comply with Ukrainian law. We sold this interest to Mr. Tashtitov for approximately $416,000, however, Freedom UA, to 10%. In August 2019, we entered into a series of contractual arrangements with Freedom UA and Mr. Tashtitov, including a consulting services agreement, an operating agreement and an option agreement. Because such agreements obligate us to: (i) guarantee the performance of all Freedom UA obligations and provide Freedom UA sufficient funding to cover all Freedom UA operating losses and net capital requirements, (ii) enable us to receive 90% of the net profits of Freedom UA after tax, and (iii) require us to provide Freedom UA the management competence, operational support, and ongoing access to our significant assets, technology resources and expertise to necessary to conduct the business of Freedom UA; we account for Freedom UAis treated as a variable interest entity (“VIE”) under the accounting standards of the Financial Accounting Standards Board (“FASB”). Accordingly,U.S. GAAP and its financial statements are consolidated into the financial statements of Freedom UA are consolidated into our financial statements.
From time to time we may identify business acquisition opportunities we believe are in the best interest of the Company and our stockholders, but for various reasons, including the need to obtain regulatory approvals, the target entity’s lack of financial statements and or internal controls meeting the standards required of the PCAOB and the SEC, or the business not being sufficiently mature, we may be precluded from completing the acquisition within a time frame acceptable to the seller. In the past when presented with such situations, Mr. Turlov or other related persons have made such acquisitions, and then once necessary regulatory approvals have been received, proper financial statements and internal controls have been implemented and the business has matured sufficiently, we have acquired the business from the related party for a purchase price that does not exceed the historical price paid by the related party plus capital contributions, if any, made by the related party after acquisition. It is foreseeable that we will pursue similar acquisitions in the future, although we have not executed definitive agreements for any such acquisitions as of the date of this proxy statement.
As noted elsewhere in this proxy statement, under U.S. exchange and market rules, we are deemed a “Controlled Company” because Mr. Turlov currently owns 7.26% of our total outstanding common stock. The Audit Committee Charter provides that the audit committee will review all relationships and transactions with related parties. Based on all the relevant facts and circumstances, the audit committee will decide whether a related-person transaction is appropriate and will approve only those transactions that are in our best interests and that conform with SEC rules prohibiting personal loans to executive officers and directors.
STOCKHOLDER PROPOSALS
FOR THE 20222023 ANNUAL MEETING
As required by SEC Rule 14a-8 and provided in the proxy access provisions of our By-Laws, you may request that we include a proposal in the proxy statement and form of proxy for our 20222023 annual meeting of stockholders (the “2022“2023 Annual Meeting”), including director nominations. The proposal must be in writing and should be mailed by certified mail, return receipt requested, and must comply in all respects with Rule 14a-8 under the Exchange Act, the laws of the state of Nevada and our By-Laws. Your proposals should be delivered to the Chairman of the Nominating and Corporate Governance Committee c/o Corporate Secretary, Freedom Holding Corp, 1930 Village Ctr. Cir., #3-6972, Las Vegas, Nevada 89134.For a proposal to be included in our Proxy Materials for the 2022 Annual Meeting, it must be delivered to us not earlier than the close of business on March 3, 2022,2, 2023, and not later than the close of business on April 2, 2022. 1, 2023. In the event that our 20222023 Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of our 20212022 Annual Meeting, your proposal must be delivered to us not earlier than the close of business on the 150thday prior to the date of our 20222023 Annual Meeting and not later than the close of business on the later to occur of (i) the 120thday prior to the 20222023 Annual Meeting, and (ii) the tenth day following the day on which public announcement of the date of such meeting is first made.
Notice of any proposal that you intend to present at the 20222023 Annual Meeting, but do not intend to have included in the proxy statement and form of proxy relating to the 20222023 Annual Meeting (other than pursuant to Rule 14a-8 or the proxy access provisions of our By-laws), must be in writing and delivered to our Corporate Secretary, Freedom Holding Corp. at 1930 Village Ctr. Cir., #3-6972, Las Vegas, Nevada 89134 not earlier than close of business on April 2, 2022,1, 2023, and not later than the close of business on May 2, 2022.1, 2023. In the event that our 20222023 Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of our 20212023 Annual Meeting, your proposal must be delivered to us not earlier than the close of business on the 120thday prior to the date of our 20222023 Annual Meeting and not later than the close of business on the later to occur of (i) the 90thday prior to the 20222023 Annual Meeting, and (ii) the tenth day following the day on which public announcement of the date of such meeting is first made.
Each item of business proposed by a stockholder, including director nominations, must be made in accordance with our By-laws, Nevada state corporate law and any other applicable law, rule or regulation. In addition, any notice of a proposed director candidate must also comply with our By-laws, including the criteria set forth under “Stockholder Nominees for Director” elsewhere in this this proxy statement. If written notice is not given in accordance with these requirements, including by the dates set forth above, the proposal or nomination will be considered deficient or untimely, as applicable, and we may exclude such business from consideration at the meeting.
For all matters other than director nominations that you wish to bring before the meeting, you must provide the following information:
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•a brief description of the business desired to be brought before the meeting;
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•the reason for conducting such business at the meeting;
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•the text of any proposal or business;
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•any substantial interest (such as financial or personal interest) you and the beneficial owner, if any, on whose behalf the matter is being proposed have in the matter;
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•any other information relating to you and the beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filing required to be made in connection with
solicitations of proxies for the proposal and pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder;
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•a description of all agreements, arrangements, or understandings between or among you and the beneficial owner, if any, on whose behalf you are making the proposal, including any of their affiliates or associates, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such person or persons or any of their affiliates or associates, in such business, including any anticipated benefit therefrom to such person or persons, or their affiliates or associates; and
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•As to you, you must provide:
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◦your name and address as they appear on our books and of the beneficial owner, if any, on whose behalf the nomination is being made;
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◦the class and number of our shares which are owned by you (beneficially and of record) and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of your notice, and a representation that you will notify us in writing of the class and number of such shares owned of record and beneficially by you as of the record date for the meeting within five business days after the record date for such meeting;
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◦a description of any agreement, arrangement, or understanding with respect to such nomination between or among you or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that you will notify us in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting;
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◦a description of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of your notice by, or on your behalf, or the beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of such person or any of their affiliates or associates with respect to shares of our stock, and a representation that you will notify us in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the record date for such meeting;
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◦a representation that you are a holder of record of our shares entitled to vote at the meeting and you intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; and
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◦a representation whether you intend to deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from stockholders in support of the nomination. We may require any proposed nominee to furnish such other information as we may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
2022 ANNUAL REPORT ON FORM 10-K
Included with these Proxy Materials is a copy of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021,2022, without exhibits, as filed with the SEC. We will furnish to each person whose proxy is solicited, on the written request of that person, a copy of the exhibits to that Annual Report on Form 10-K without charge. We will also mail to you without charge, upon request, a copy of any document specifically referenced or incorporated by reference in this proxy statement. Please direct your request to Corporate Secretary at Freedom Holding Corp, 1930 Village Center Cir. #3-6972, Las Vegas, Nevada 89134.89134.
INCORPORATION BY REFERENCE
To the extent this proxy statement is incorporated by reference into any other filing by us under the Securities Act of 1933, as amended or the Exchange Act, the section of this proxy statement entitled “Report of the Audit Committee” (to the extent permitted by SEC rules) will not be deemed so incorporated, unless specifically provided in such filing.
OTHER MATTERS
We know of no other matters to be submitted to our stockholders at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.