DEF: Freedom Holding Corp. Schedules 2025 Annual Meeting, Seeks Shareholder Votes on Directors and Executive Pay

Freedom Holding Corp. has filed its definitive proxy statement for the 2025 Annual Meeting, outlining proposals for director elections, an advisory vote on executive compensation, and the ratification of its independent auditor.

Summary

• Freedom Holding Corp. will hold its 2025 Annual Meeting of Stockholders virtually on September 29, 2025, at 11:00 a.m. Eastern Daylight Time (EDT).
• Shareholders will vote on the election of two Class III directors, Timur Turlov and Philippe Vogeleer, to serve until the 2028 Annual Meeting.
• A non-binding advisory vote will be held to approve the compensation of the company's named executive officers.
• Shareholders will also vote to ratify the appointment of Deloitte LLP in Kazakhstan as the independent registered public accounting firm for the 2026 fiscal year.
• The record date for voting at the 2025 Annual Meeting is July 31, 2025.
• The company's CEO, Timur Turlov, received a total compensation of $7,512,043 for fiscal year 2025.
• The median employee's total compensation for fiscal year 2025 was $7,887, resulting in a CEO pay ratio of 952 to 1.
• Net income for fiscal year 2025 was $84,521, a significant decrease from $374,952 in fiscal year 2024.
• The company's Total Shareholder Return (TSR) for fiscal year 2025, based on an initial $100 investment, was $248, down from $497 in fiscal year 2024.
• Audit fees paid to Deloitte LLP increased to $8,050,017 in fiscal year 2025 from $7,048,059 in fiscal year 2024.

Sentiment

Score: 3

Explanation: The sentiment is negative due to a significant decline in net income and Total Shareholder Return (TSR) in fiscal year 2025, coupled with high executive compensation and governance concerns related to the 'Controlled Company' status and related party transactions. While the filing is a standard proxy, the underlying financial performance data presented within it is concerning.

Positives

• The company maintains a formal policy prohibiting directors, executive officers, and certain other employees from engaging in short sale transactions, derivatives, holding company securities in margin accounts, or pledging company securities.
• A Compensation Recoupment Policy was adopted in October 2023, allowing for the recovery of erroneously paid performance-based incentive compensation in case of financial restatements.
• The Audit Committee consists solely of independent directors, and its chair, Ms. Amber Williams, qualifies as an audit committee financial expert.
• The company conducts an annual advisory 'say-on-pay' vote, with approximately 96% of votes cast in favor of executive compensation at the 2024 Annual Meeting, demonstrating high shareholder support.
• The Board has established a Lead Independent Director position, held by Amber Williams, to enhance communication between non-employee directors and senior management.

Negatives

• Freedom Holding Corp. is classified as a 'Controlled Company' under Nasdaq rules due to Timur Turlov owning approximately 70% of common stock, which exempts it from certain independence requirements for the Board and its committees.
• The Compensation Committee and Nominating and Corporate Governance Committee include non-independent directors (Timur Turlov and Kairat Kelimbetov, respectively), which is permitted under 'Controlled Company' exemptions but deviates from standard governance best practices.
• Net income for fiscal year 2025 significantly decreased to $84,521 from $374,952 in fiscal year 2024.
• Company Total Shareholder Return (TSR) saw a substantial decline in fiscal year 2025, with the value of a $100 investment dropping from $497 in FY2024 to $248 in FY2025, falling below the peer group's TSR of $147 for FY2025.
• Executive compensation, particularly for the CEO, remained high or increased despite the significant decline in net income and company TSR in fiscal year 2025.

Risks

• The company's 'Controlled Company' status means it is not required to have a majority of independent directors or fully independent nominating and compensation committees, potentially impacting corporate governance and shareholder oversight.
• The significant decline in net income and Total Shareholder Return (TSR) in fiscal year 2025 indicates potential operational or market challenges.
• Related party transactions, such as brokerage services to ITS Central Securities Depository Limited ($29.7 million receivables), bank deposits from Turlov Family Office Securities ($6.2 million liabilities), and the purchase of uncollateralized customer loans from Microfinance Organization Freedom Finance Credit ($183.6 million loans issued), all controlled by Timur Turlov, present potential conflicts of interest.
• The company incurred $11.2 million in advertising and sponsorship expense from Kazakhstan Chess Federation, an entity where Timur Turlov holds a management position, raising questions about the allocation of funds to related parties.

Future Outlook

The compensation committee and Board are re-evaluating executive compensation and expect to make several changes to NEOs base salary and/or make discretionary cash bonus and/or equity incentive awards for the 2026 fiscal year. No specific financial guidance or forward-looking statements regarding business operations or performance were provided beyond compensation plans.

Management Comments

• We urge you to please vote your shares now. Your vote is important to us.
• The Board believes that the combined role of Chairman and Chief Executive Officer also facilitates the flow of information between the Board and management.
• The Board believes the inclusion of Mr. Turlov, the controlling stockholder of the Company, holding approximately 70% of its outstanding common shares, as a member of the compensation committee is in the best interests of the Company and its stockholders.
• The Board believes the inclusion of Mr. Kelimbetov as a member of the nominating and corporate governance committee is in the best interests of the Company and its stockholders.

Industry Context

The company operates in the financial services industry, specifically including investment banking organizations, with a significant presence in Kazakhstan and other CIS countries, Europe, and the Middle East. The filing highlights the company's efforts to align executive compensation with market leadership, revenue growth, and stockholder value, consistent with broader industry trends towards pay-for-performance models. The company's peer group for compensation benchmarking includes publicly traded financial services firms like Jefferies Financial Group Inc., Interactive Brokers Group, Inc., and Stifel Financial Corp., indicating its competitive landscape.

Comparison to Industry Standards

• The company's Total Shareholder Return (TSR) for fiscal year 2025 ($248 for a $100 investment) significantly underperformed its peer group's TSR ($147 for a $100 investment) for the same period, indicating a relative decline in shareholder value creation compared to industry benchmarks.
• In previous fiscal years (FY2021-FY2024), the company's TSR consistently outperformed the peer group, suggesting a recent reversal in relative performance.
• The CEO pay ratio of 952 to 1 is substantially higher than typical ratios seen in many publicly traded companies, which often range from 100:1 to 400:1, potentially indicating a less equitable distribution of compensation compared to broader industry norms.
• The company's 'Controlled Company' status, while permitted by Nasdaq rules, deviates from the corporate governance standards of many large, publicly traded financial institutions that prioritize a majority of independent directors and fully independent key committees.

Management Changes

Corporate Governance

Related Party Transactions

• The company provides brokerage services to ITS Central Securities Depository Limited, a subsidiary of International Trading System Limited, which is controlled by Timur Turlov. As of March 31, 2025, the company had $29.7 million in brokerage and other receivables from this entity.
• As of March 31, 2025, the company's subsidiary Freedom Bank KZ held $6.2 million in customer liabilities (bank deposits) from Turlov Family Office Securities (PTY) LTD, a private securities brokerage company wholly owned by Timur Turlov.
• As of March 31, 2025, the company had $183.6 million in loans issued, representing uncollateralized customer loans purchased by Freedom Bank KZ from Microfinance Organization Freedom Finance Credit LLP (FFIN Credit), a company outside the FRHC group controlled by Timur Turlov.
• During the fiscal year ended March 31, 2025, the company incurred $11.2 million in advertising and sponsorship expense from Kazakhstan Chess Federation (KCF), a Kazakhstan-based entity in which Timur Turlov holds a management position.

Stakeholder Impact

• Shareholders: The decline in net income and TSR, coupled with high executive compensation and related party transactions, could negatively impact shareholder value and confidence. The 'Controlled Company' status may limit the influence of minority shareholders on governance matters.
• Employees: The company's compensation programs aim to attract, motivate, and retain a highly qualified executive team. The median employee compensation and CEO pay ratio highlight a significant disparity in earnings.
• Customers: The company's continued operations and strategic focus on telecommunications and ICT may lead to new products and services. Related party transactions involving customer loans could raise questions about lending practices.
• Regulatory Bodies: The company's adherence to SEC and Nasdaq rules, including the adoption of a recoupment policy, demonstrates compliance efforts, but the 'Controlled Company' status and related party dealings may draw scrutiny.

Next Steps

• The 2025 Annual Meeting of Stockholders will be held virtually on September 29, 2025, where shareholders will vote on the outlined proposals.
• The company will report the voting results in a Current Report on Form 8-K within four business days after the 2025 Annual Meeting.
• The compensation committee and Board expect to make several changes to Named Executive Officers' base salary and/or make discretionary cash bonus and/or equity incentive awards for the 2026 fiscal year.
• The next advisory vote on executive compensation is currently planned to be held at the 2026 Annual Meeting.

Key Dates

Recommendation

While the filing is a routine proxy statement, the financial performance data disclosed within it for fiscal year 2025 shows a significant decline in net income and Total Shareholder Return (TSR), with the company's TSR falling below its peer group. This negative financial trend, combined with the 'Controlled Company' status and notable related party transactions, presents a mixed picture. The high CEO pay ratio amidst declining performance could also be a point of concern. Given these factors, a 'hold' recommendation is appropriate, advising investors to monitor future financial reports and governance developments closely before making further investment decisions.

Keywords

SEC filing, Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Director Election, Auditor Ratification, Shareholder Vote, Financial Services, Investment Banking, Risk Management, Controlled Company, Related Party Transactions, Nasdaq