Central Securities Depository (Control of Assets) Regulations,

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 18,412, 30 ta’ April, 2009

Taqsima B

L.N. 139 of 2009

FINANCIAL MARKETS ACT

(CAP. 345)

Central Securities Depository (Control of Assets) Regulations,

IN exercise of the powers conferred by article 30 of the

Financial Markets Act, the Minister of Finance, the Economy and

Investment, after consultation with the Malta Financial Services

Authority, has made the following regulations:-

Part 1

Preliminary

(1) The title of these regulations is the Central

Securities Depository (Control of Assets) Regulations, 2009.

(2) These regulations regulate the control of assets by

a person authorised to operate as a central securities depository.

(1) Any reference in these regulations to the Act

is a reference to the Financial Markets Act, and subject to the

provisions of sub-regulation (2) of this regulation, the provisions

of article 2 of the said Act shall also apply to these regulations.

(2)

In these regulations, unless the context otherwise

requires-

“assets” means movable property of any kind;

“control of assets” means the holding or control of

assets belonging to, or on behalf of a customer, by a person

hereinafter referred to as the subject person;

“customer” means any person whose assets are held

under the control of a subject person;

“subject person” means a person who is in possession of

an authorisation to operate as a central securities depository

under the Act.

Part 2

General

(1) A subject person having the control of assets

belonging to a customer in the course of rendering a service to such

customer, shall hold such assets solely for and on behalf of, and in

the interest of, the customer.

(2) Notwithstanding anything otherwise stated in

article 1894 of the Civil Code, or in the agreement entered into

between the subject person and the customer, or the fact that a

customer’s assets held under the control of a subject person are

registered in the name and title of, or are otherwise vested in the

subject person, such assets shall be deemed to constitute a distinct

patrimony, separate from that belonging to the subject person and

from that of other customers whose assets are also held under the

control of the subject person.

(3) Except as expressly provided in the agreement

entered into between the subject person and the customer and

notwithstanding the provisions of the Civil Code, the control of

assets belonging to a customer by a subject person shall not give

or be deemed or construed to give to the subject person any rights

over such assets nor shall it create any form of loan between the

subject person and the customer and, this notwithstanding, the

nature of the assets or the rights or obligations of the subject person

in relation to the assets.

(1) A customer whose assets are held under the control

of a subject person enjoys a right of ownership in such assets

notwithstanding that they may be registered in the name and title

of, or are otherwise vested in, the subject person. Where such

assets are held by the subject person as part of a common pool

of identical assets or are otherwise held in a clients’ or common

account, the customer enjoys an undivided share in ownership of

all the assets held collectively by the subject person in such a pool

or account.

(2) The records, accounts and other statements held

or issued by the subject person in terms of sub-regulation (3) of

regulation 7 of these regulations shall, saving any proof to the

contrary, constitute evidence of their contents and of the right of

ownership of the customer as provided in sub-regulation (1) of this

regulation.

(1) The creditors of a subject person shall have no claim Assets held under

or right of action on or against the assets held under the control control

of the subject person for and on behalf of, and in the interest of, of the subject person.

any customer and such assets shall not be affected in any manner

by the provisions of laws and regulations in force regulating the

insolvency or bankruptcy of the subject person.

(2) In the event of any such insolvency or bankruptcy

or related order or resolution, or in the event that the competent

authority so requires, the subject person or any administrator or

receiver or other officer appointed to represent it by any court or

otherwise shall, on demand of any customer or of the competent

authority, immediately transfer the control, possession and title to

all assets held by or in the name of the subject person on behalf of

the customer to another subject person or to such other person as

may be instructed by the customer or by the competent authority.

(3) In the event that any assets held under the control

of the subject person are, at the request of any creditor of the

subject person, made subject to any precautionary or executive

act or warrant granted by any Court in terms of the Code of

Organization and Civil Procedure, the customer on whose behalf

such assets are being held or the competent authority may, by

application to the Court, request the release of the assets from such

act or warrant and the Court shall, on production of evidence, as it

may deem fit, accede to the application without undue delay.

(1) The delivery of the assets of a customer to a subject Applicability of Duty

person and from a subject person to a customer or another subject on

person for the purpose of the control of assets in terms of these and Income Tax Act.

regulations shall not be deemed to constitute a chargeable transfer

for the purposes of the Duty on Documents and Transfers Act, and Act XVII of 1993.

for the purposes of subsection (1) of section 5 of the Income Tax Cap. 123.

Act, where the delivery of such assets does not constitute a change

in the beneficial owner of the assets.

(2) For the purpose of this regulation, “beneficial

owner” means a person who is the real owner of, or who is

otherwise beneficially entitled to the assets held under control by

the subject person, as provided in regulation 4 of these regulations.

Part 3

Control of Assets

(1) A subject person having the control of assets

belonging to a customer shall safeguard such assets and the interest

of the customer therein.

(2) The subject person shall carry out such functions

and duties as shall be required according to these regulations,

the terms and conditions of the agreement entered into with the

customer, the conditions of any authorisation to operate as a central

securities depository and such other requirements as may be laid

down by the competent authority.

(3) The subject person shall maintain proper and

adequate records and accounts of all customers’ assets held under

control. The records and accounts shall identify the customers

to whom such assets belong and shall clearly indicate that the

assets of every customer are separate and distinct from the assets

belonging to the subject person and from other customers’ assets

held by the subject person. The records and accounts shall, upon

due notice being given to the subject person, indicate where any

pledge or other right over assets held under the control of the

subject person has been given by the customers to any third party

and where any order by any Court has been made in connection

with such assets.

(4) The subject person entrusted with the control of

assets belonging to customers shall, to every extent reasonably

possible, segregate in a proper manner the assets of every customer

from the assets belonging to the subject person and from the assets

of other customers

Provided that the subject person may, with the written

consent of the customer and in accordance with the terms and

conditions of the agreement entered into with the customer, the

conditions of any authorisation to operate a central securities

depository and such other requirements as may be laid down by

the competent authority, and without prejudice to the customer’s

right of ownership over the assets held under control, place and

keep such assets in a common pool of identical assets or otherwise

deposit them in a clients’ account or a common account.

(5)

The subject person shall make appropriate

arrangements for the protection of customers’ assets held under

control and shall ensure that such assets are placed under adequate

systems to safeguard such assets from damage, misappropriation

or other loss and which permit the delivery of such assets only in

accordance with the terms and conditions of the agreement entered

into with the customer.

(6) Where it is not reasonably possible for the subject

person to carry out any of the duties specified in this regulation due

to the nature of the assets and of the arrangements whereby control

is exercised, the said duties may be varied with the written consent

of the customer and in accordance with the terms and conditions

of the agreement entered into with the customer, the conditions

of any authorisation to operate a central securities depository and

such other requirements as may be laid down by the competent

authority.

(1) A subject person having the control of assets

belonging to customers shall be liable for any loss or prejudice

suffered by the customers due to the subject person’s fraud, willful

default or negligence, including the unjustifiable failure to perform

in whole or in part the subject person’s obligations arising under

these regulations, the terms and conditions of the agreement

entered into with the customers, the conditions of any investment

services licence or such other requirements as may be laid down by

the competent authority.

(2) For the purposes of this regulation, “subject

person” includes such other subject person to whom functions,

duties or assets may be delegated or entrusted in terms of regulation

9 of these regulations.

(1) Where reasonably required by the nature of the

assets and of the arrangements whereby control is to be exercised, a

subject person may, with the written consent of the customer and in

accordance with the terms and conditions of the agreement entered

into with the customer, the conditions of any authorisation to

operate a central securities depository and such other requirements

as may be laid down by the competent authority, make use of any

market clearing system, settlement system, de-materialised book

entry system, centralised custodial depository or similar system for

the purpose of the control of assets in terms of these regulations.

(2) Such systems as are provided for in sub-regulation

(1) of this regulation may also be used to effect all transactions

including conveyance, assignment, transfer, transmission and

pledging of assets held under the control of the subject person,

and the law of the country in which the system is maintained shall

apply to the validity of such transactions notwithstanding the

provisions of any other law.

(3) The agreement with the customer shall clearly

define the extent of liability of the subject person for any losses

that may be incurred by the customer as a result of the use of such

systems.

The subject person shall have the right to charge fees

to the customer and to be reimbursed for expenses in accordance

with the terms and conditions of the agreement entered into with

the customer. The subject person may, if authorised to do so by

the terms and conditions of the said agreement, exercise a right

of retention over the customer’s assets held under control, to the

extent of any lawfully due but unpaid fees and expenses, until such

fees and expenses are paid.

(1) Without prejudice to any requirements as may

be laid down by the competent authority, an agreement for the

control of assets belonging to a customer may be terminated by

the customer, by the subject person or by order of the competent

authority.

(2) Upon the termination of an agreement for

the control of assets, the subject person shall convey for no

consideration the assets held for the customer, as instructed by

the customer or by the competent authority, without prejudice to

the subject person’s right to payment of any lawfully due fees or

expenses in terms of the agreement entered into with the customer

and to any obligations arising in favour of the customer thereunder.

€0.28