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AMEDA Leadership Forum Egypt Overview of the requirements for compliance with G30, the Implications for CSDs of Unidroit and the Hague Conventions. PRESENTED BY: Anne Njoroge DATE: Monday, 27 April 2009. INTERNATIONAL ORGANISATIONS. - PowerPoint PPT Presentation
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AMEDA Leadership Forum Egypt
Overview of the requirements for compliance with G30, the Implications for CSDs of Unidroit and the
Hague Conventions
PRESENTED BY: Anne Njoroge DATE: Monday, 27 April 2009
INTERNATIONAL ORGANISATIONS
International activity in the post-trade clearing and settlement arena:
Group of Thirty
Giovannini Group
ISSA
Hague Conference on Private International Law
UNIDROIT
Conventions: Hague and UNIDROIT
Group of Thirty
Consultative Group on International, Economic and Monetary Affairs
Private non-profit, international body with representatives from public and private
sectors
Examines international economic and financial issues
Recommendations to improve the safety and efficiency of international securities
markets
G30 Recommendations: Interoperable global network
Eliminate paper and automate communication, data capture, and enrichment.
Harmonize messaging standards and communication protocols.
Develop and implement reference data standards.
Synchronize timing between different clearing and settlement systems and
associated payment and foreign-exchange systems.
Automate and standardize institutional trade matching.
Expand the use of central counterparties.
Permit securities lending and borrowing to expedite settlement.
Automate and standardize asset servicing processes, including corporate
actions, tax relief arrangements, and restrictions on foreign ownership.
G30 Recommendations: Mitigating Risk
Ensure the financial integrity of providers of clearing and settlement services.
Reinforce the risk management practices of users of clearing and settlement
service providers.
Ensure final, simultaneous transfer and availability of assets.
Ensure effective business continuity and disaster recovery planning.
Address the possibility of failure of a systemically important institution.
Strengthen assessment of the enforceability of contracts.
Advance legal certainty over rights to securities, cash, or collateral.
Recognize and support improved valuation and closeout netting arrangements.
G30 Recommendations: Improving Governance
Ensure appointment of appropriately experienced and senior board members.
Promote fair access to securities clearing and settlement networks.
Ensure equitable and effective attention to stakeholders’ interests.
Encourage consistent regulation and oversight of securities clearing and
settlement service providers.
Giovannini Group
Group of financial markets experts
Advises European Commission on harmonisation of rules, regulations and
practices for a single EU financial market
Lack of harmonisation creates barriers to cross-border clearing and settlement
International Securities Services Association ISSA
Formed as association of securities administrators from around the world
Key objective is to share professional knowledge in the securities industry
89 member institutions from 48 countries
Members include infrastructure providers and users
Hague Conference on Private International Law
International organisation
Purpose: working for progressive unification of rules of private international law
AME Member States: Egypt (1961), Israel (1964), Morocco (1993), Jordan
(2001) and South Africa (2002)
Hague Conventions: multilateral treaties
Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary
Convention signed by Switzerland and the United States (2006), and Mauritius
(2008)
Provides legal certainty and predictability as to the law applicable to securities
held through intermediaries
Facilitates international flow of capital by reduction of legal risk and associated
costs in relation to cross-border securities transactions
Hague Convention
Traditional conflict of law approach: law of the place where securities are located
Unsatisfactory: requires “look-through” various layers of intermediaries to level of
issuer or register
Uncertainties in “look-through” approach
Place of relevant intermediary approach
Express agreement on governing law between account holder and intermediary,
subject to qualifying office requirement
Fall-back provisions
Hague Convention: Scope
Law determined in accordance with Convention is applicable to the following
issues:
Legal nature and effects of rights resulting from credit of securities
Legal nature and effect of disposition of securities
Requirements, if any, for perfection of disposition of securities
Priority of interests and effects
Duties of intermediary with regard to competing interests
Realisation of interest in securities
Disposition of securities and entitlements to dividends, income, or other distributions
UNIDROIT
United Nations International Institute for the Unification of Private Law
Inter-governmental organisation - Rome
Examines ways of harmonising and co-ordinating private law of States
AME Member states: Egypt (1951), Israel (1954), Nigeria (1964), South Africa
(1971), Tunisia (1980) and Saudi Arabia (2009)
UNIDROIT Draft Convention on Substantive Rules Regarding Intermediated Securities
International legal instrument to improve the legal framework for securities holding, transfer
and securities lending and borrowing
Provides basic legal framework for modern intermediated securities
Limitation and management of systemic risk
Supports intergration and competitiveness in financial markets
Enhancement of cross-border interconnectivity of systems
International treaty
Upon ratification, becomes “hard law” overriding domestic law
Need for harmonisation of domestic law with Convention
Convention allows “carve out” provisions through Declarations
Member States may denounce Convention after 12 months notice
UNIDROIT Draft Convention: Scope
Transparent and non-transparent systems of uncertificated securities holding
through intermediaries
Intermediated securities - intermediaries may include banks, brokers, financial
institutions and the central depository
Applies when transfer, pledge etc, take effect through book-entries
Does not apply to:
issuer activities
corporate law issues
supervisory issues
UNIDROIT Draft Convention
Potential legal risk in exercising rights through layers of intermediaries
Concept of ownership: CSD holding in omnibus accounts or segregated
accounts for end-investors
UNIDROIT Convention caters for both transparent and non-transparent holding
patterns
UNIDROIT Convention delegates operational issues to settlement system rules
UNIDROIT Draft Convention: Key Issues
Transfer of intermediated securities
Rights resulting from credit of securities to a securities account
Finality of book entry transfers
Irrevocability of instructions
Protects good faith acquirer of securities
Priority ranking among competing interests
Preclusion of upper-tier attachment
Insolvency
Loss-allocation
Collateral (Optional)
UNIDROIT Draft Convention: Impact for CSDs
Intermediary
Transparent or non-transparent
Settlement rules
Hague Convention and UNIDROIT Draft Convention
Ensure reduction of legal uncertainty in cross-border transactions
Hague Convention determines which law will apply
UNIDROIT Convention promotes the harmonisation of substantive domestic law:
Chosen domestic law should be clear and reliable
Chosen domestic law should be compatible with the law of other jurisdictions
THANK YOU AND QUESTIONS?
Anne Njoroge
Legal Counsel
Strate Ltd
+27 11 759 5318
www.strate.co.za