CENTRAL SECURITIES DEPOSITORY (CONTROL OF ASSETS) REGULATIONS

SUBSIDIARY LEGISLATION 345.13

CENTRAL SECURITIES DEPOSITORY

(CONTROL OF ASSETS) REGULATIONS

30th April, 2009

LEGAL NOTICE 139 of 2009.

Part 1

Preliminary

(1) The title of these regulations is the Central Securities

Depository (Control of Assets) Regulations.

(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

r e f e r e n c e t o t h e F in a n c i a l M a r k e t s A c t , a nd s u bj e c t t o t h e

provisions of sub-regulation (2), 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 regulation 7(3) shall, saving any

proof to the contrary, constitute evidence of their contents and of

the right of ownership of the custom er as provided in sub-

regulation (1).

(1) The creditors of a subject person shall have no claim or

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

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

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

p r o v i s i o n s o f l a w s a n d r e g u l a t i o n s i n f o r c e r eg u l a t i n g t h e

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

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

person for the purpose of the control of assets in terms of these

regulations shall not be deemed to constitute a chargeable transfer

for the purposes of the Duty on Documents and Transfers Act, and

for the purposes of article 5(1) of the Income Tax Act, where the

deliver y of su ch assets do es n ot consti tute a chang e in t he

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.

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

o t h e r r e q u i r e m e n t s a s m ay b e l a i d d o w n b y t h e c o m p e t e n t

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.

(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) 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.