10 July 2012

European Issuers' Position on the Regulation on Central Securities Depositories

EuropeanIssuers welcomes the Proposal for a Regulation on improving securities settlement in the European Union and on CSDs, as it is their understanding that the Proposal improves settlement and reduces the risk of reversals, namely by the harmonisation of settlement cycles.

The adoption of a common regulatory framework for CSDs aims to ensure that securities clearing and settlement systems are safe, secure and reliable, do not add risks, and help reducing infrastructure services costs rendered to Issuers.

However, some major lines of concern remain:

• Free Choice Regarding Location: CSD Regulation must ensure that Issuers have the right to choose any CSD established in the EU for recording their securities and receiving CSDs services, and that that right is subject to consistent and timely implementation across Europe.
• Integrity of the Issuance: CSD Regulation must ensure that the amount of issued securities always corresponds exactly to the amount of securities that are entered into the holding system.
• Primacy of applicable corporate law: All questions related to the creation of the securities, to the rights and obligations it expresses, to the relation between the securities holder and the issuer, and to the question of who qualifies as securities holder must be governed by the law of the country under which the security has been created.
• Settlement Security: CSD Regulation must ensure that settlement is as risk free as possible, to remove the possibility of reversals. CSDs, as core market infrastructures, should not be directly exposed to any banking risk.
• Free Choice Regarding Form: CSD Regulation must not prejudice the right of investors to hold securities in certificated form.
• No Increase in Costs: After implementation, the CSD Regulation must be followed by consistent ex-post review and systematic assessment, to determine if it worked as intended and, specially, to identify inadvertent or adverse consequences for Issuers, namely related with any kind of costs increase.
• Shareholders Transparency: The European capital market needs the Shareholder Identification (identification of the end investor as the person who directly invests own money in a security) principle acknowledged EU wide.
• Common Harmonised Legal Framework: In order to ensure and enhance the safety, efficiency and competitiveness of posttrade financial market infrastructures, the CSD regulation must be consistent with global standards already in place or in course of preparation.

Full paper

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