FINANCIAL COLLATERAL ARRANGEMENTS REGULATIONS

SUBSIDIARY LEGISLATION 459.01

FINANCIAL COLLATERAL ARRANGEMENTS

REGULATIONS

1st May, 2004 *

LEGAL NOTICE 177 of 2004, as amended by Legal Notices 388 and 417

of 2004, 53 and 401 of 2005, 179 of 2006, 118 of 2011, 283 of 2013 and

208 of 2023.

(1) The title of these regulations is the Financial Collateral

Arrangements Regulations.

(2) The purpose of these regulations is, in part, to implement

the provisions of Directive 2002/47/EC on financial collateral

arrangements and Directive 2009/44/ EC of the European

Parliament and of the Council of 6 May 2009 amending Directive

98/26/EC on settlement finality in payment and securities

settlement systems and Directive 2002/47/EC, as currently in force

and as may be amended from time to time, including any

implementing measures that have been issued or may be issued

thereunder and to provide for other matters relating to financial

collateral arrangements and they shall be interpreted and applied

accordingly.

(3) In the event of a conflict between any of these regulations

and the provisions of any of the Directives mentioned in sub-

regulation (2), the provisions of the Directives shall prevail.

(4)

The provisions of these regulations shall be without

prejudice to

(a) Directive 2008/48/EC of the European Parliament and

the Council of 23 April 2008 on credit agreements for

consumers, as amended from time to time, and the

Consumer Credit Regulations; and

(b) the BRRD, the CCP RRR, the relevant provisions of the

Malta Financial Services Authority Act and Financial

Markets Act transposing the CCP RRR, and the Recovery

and Resolution Regulations..

(1)

In these regulations, unless the context otherwise

requires -

"binding legal instrument" means any directly applicable measures,

including, but not limited to, any implementing technical standards,

regulatory technical standards or similar measures, issued under

European Union legislation;

"book entry securities collateral" means financial collateral

provided under a financial collateral arrangement which consists of

instruments, title to which is evidenced by entries in a register or

*see regulation 1(2) of these Regulations as originally promulgated.

account maintained by or on behalf of an intermediary;

"BRRD" means Directive 2014/59/EU of the European Parliament

and of the Council of 15 May 2014 establishing a framework for the

recovery and resolution of credit institutions and investment firms and

amending Council Directive 82/891/EEC, and Directives 2001/24/EC,

2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU,

2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010

and (EU) No 648/2012, of the European Parliament and of the

Council, as amended from time to time, and includes any binding legal

instruments, guidelines and other measures that have been or may be

issued thereunder;

"cash" means money credited to an account in any currency, or

similar claims for the repayment of money, including money

market deposits;

"CCP RRR" means Regulation (EU) 2021/23 of the European

Parliament and of the Council of 16 December 2020 on a framework

for the recovery and resolution of central counterparties and amending

Regulations (EU) No 1095/2010, (EU) No 648/2012, (EU) No 600/

2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 2002/47/

EC, 2004/25/EC, 2007/36/EC, 2014/59/EU and (EU) 2017/1132, as

amended from time to time, and includes any implementing measures

that have been or may be issued thereunder;

"central counterparty" means an entity which is interposed

between institutions and which acts as the exclusive counterparty

of these institutions with regard to their transfer orders;

"clearing house" means an entity responsible for the calculation

of the net positions of institutions, a possible central counterparty

and, or a possible settlement agent;

"close-out netting provision" means a provision of a financial

collateral arrangement, or of an arrangement of which a financial

collateral arrangement forms part, or, in the absence of any such

provision, any statutory rule by which, on the occurrence of a

specified event, whether through the operation of netting or set-off

or otherwise

(a) the benefit of time for the performance of relevant

obligations by the collateral provider may no longer be

claimed and, or the relevant obligations become

immediately due and expressed as an obligation to pay

an amount representing their estimated current value,

or are terminated and replaced by an obligation to pay

such an amount; and, or

(b) an account is taken of what is due from each party to

the other in respect of such obligations, and a net sum

equal to the balance of the account is payable by the

party from whom the larger amount is due to the other

party;

"credit claims" means

(a) pecuniary claims arising out of an agreement whereby

a bank or credit institution within the meaning of

regulation 4(1) grants credit in the form of a loan; or

(b) pecuniary claims due to a non-natural person, provided

that the debtor of the claims granted as collateral is also a

non-natural person;

"EEA State" means any State which is a contracting party to the

agreement on the European Economic Area signed at Oporto on the

2nd May, 1992, as adjusted by the Protocol signed in Brussels on

17th March, 1993 and as amended by any subsequent act;

"equivalent collateral" means

(a) in relation to cash, a payment of the same amount and

in the same currency; and

(b) in relation to instruments

(i)

instruments of the same issuer or debtor,

forming part of the same issue or class and of

the same nominal amount, currency and

description; or

(ii) any other assets provided as financial collateral

where a financial collateral arrangement

provides for the transfer of other assets

following the occurrence of any event relating to

or affecting any instruments provided as

financial collateral;

"European Union" means the European Union referred to in the

Treaty;

"Financial Collateral Arrangements Directive" means Directive

2002/47/EC of the European Parliament and of the Council of 6 June

2002 on financial collateral arrangements, as amended from time to

time;

"financial collateral arrangement" means

(a) in the case of a title transfer financial collateral

arrangement, an arrangement, including repurchase

agreements, under which a collateral provider transfers

full ownership of, or full entitlement to, financial

collateral to a collateral taker for the purpose of

securing or otherwise covering the performance of

relevant financial obligations; and

(b) in the case of a security financial collateral

arrangement, an arrangement under which a collateral

provider provides financial collateral by way of

security for the purpose of securing or otherwise

covering the performance of relevant financial

obligations to or in favour of a collateral taker, and

where the full or qualified ownership of, or full

entitlement to, the financial collateral remains with the

collateral provider when the security right is

established;

whether or not these arrangements are covered by a master

agreement, standard form contract or general terms and conditions;

"instrument" means

FINANCIAL COLLATERAL ARRANGEMENTS

(a) shares in companies and other securities or

participation interests or rights equivalent to shares in

companies, partnerships and other entities;

(b) bonds and other securities

giving

rise

to

or

acknowledging indebtedness;

(c) any other securities which give the right to acquire any

such shares, bonds, or other securities or participation

interests or rights by subscription, purchase or

exchange or which give rise to a cash settlement

(excluding instruments of payment), including units in

collective investment schemes and money market

instruments;

(d) to the extent not already mentioned above, any

instrument as defined in article 2 of the Investment

Services Act; and

(e) claims relating to, or rights in, or in respect of, any of

the securities, participation interests or rights and

instruments in terms of paragraphs (a), (b), (c) or (d)

hereof;

"master agreement" means an agreement that provides the

standard terms and conditions applicable to all or a defined subset

of transactions that may be entered into from time to time,

including the terms and conditions for close-out netting;

"M ember St ate" m eans a State which is a m ember of the

European Union;

"the Minister" means the Minister responsible for financial

regulation;

"non-natural person" means any legal person, unincorporated

firm or body of persons or partnership not being an individual;

"OECD country" means any country that is a member of the

Organisatio n for Econom ic Co-operation and Devel opment

established in 1961;

"publicly guaranteed undertakings" means any company or

partnership whose obligations are by law guaranteed by the

Government;

"recognised jurisdiction" means

(a) an EU Member State or an EEA State;

(b) any country that is a member of the Organisation for

Economic Co-operation and Development (OECD);

(c) a country that is a signatory of the IOSCO Multilateral

Memorandum of Understanding; or

(d) any other jurisdiction with whom the Authority

established in terms of the Malta Financial Services

Authority Act has a Memorandum of Understanding

covering securities;

"registered instrument" means an instrument in respect of which

the owner ’s name is recorded on the books of the issuer or the

issuer’s agent;

"relevant account" in relation to book entry securities collateral

means the register or account, which may be maintained by the

collateral taker, in which the entries are made whereby such

securities collateral is provided to the collateral taker and made

subject to a financial collateral arrangement;

"relevant financial obligations" means the obligations which are

secured by a financial collateral arrangement and which give a

right to cash settlement and, or delivery of instruments, including

(a) present or future, actual or contingent or prospective

obligations (including such obligations arising under a

master agreement or similar arrangement);

(b) obligations owed to the collateral taker by a person

other than the collateral provider; or

(c) obligations of a specified class or kind arising from

time to time;

"reorganisation measures" means measures which involve any

intervention by administrative or judicial authorities which are

intended to preserve or restore the financial situation and which

affect pre-existing rights of third parties, including but not limited

to measures involving a suspension of payments, suspension of

enforcement measures or reduction of claims. Such measures shall

be deemed to include the appointment of a Special Controller in

terms of article 329B of the Companies Act or the appointment of

an equivalent or similar officer or controller under any other law;

"right of use" means the right of the collateral taker to use and

dispose of financial collateral provided under a security financial

collateral arrangement as the owner of it in accordance with the

terms of the security financial collateral arrangement;

"settlement agent" means an entity providing to institutions and,

or a central counterparty, settlement accounts through which

transfer orders are settled and, as the case may be, extending credit

to those institutions and, or central counterparties for settlement

purposes;

"specified event" means an event of default or any similar event

as agreed between the parties on the occurrence of which, under the

terms of a financial collateral arrangement or by operation of law,

the collateral taker is entitled to realise or appropriate financial

collateral or a close-out netting provision comes into effect;

"the Treaty" has the same meaning assigned to it by article 2 of

the European Union Act;

"winding-up proceedings" means collective proceedings

involving realisation of the assets and distribution of the proceeds

among the creditors, shareholders or members as appropriate,

which involve any intervention by administrative or judicial

authorities, including where the collective proceedings are

terminated by a composition or other analogous measure, whether

or not they are founded on insolvency or are voluntary or ordered

by the court.

(2) References in these regulations to financial collateral being

"provided", or to the "provision" of financial collateral, are

references to the financial collateral being delivered, transferred,

h e l d , r e g i s t e r e d o r ot h e r w i s e d e s ig n a t e d s o as t o be in t he

possession or under the control of the collateral taker or of a person

acting on the collateral taker’s behalf

Provided that a collateral taker shall also be deemed to have

control over financial collateral when this is held by a third party, non-

natural person, who acts on the instructions of the collateral taker or of

a person acting on his behalf, whether throughout the duration of the

financial collateral arrangement or upon the occurrence of an event of

default under the financial collateral arrangement

Provided further that any right of substitution, right to

withdraw excess financial collateral, right to give instructions in

relation to an account until an event of default occurs, any right to

exercise rights or receive the fruits attaching to or in respect of the

financial collateral in favour of the collateral provider or, in the

case of credit claims, any right to collect the proceeds thereof until

further notice, shall not prejudice the financial collateral having

been provided to the collateral taker as mentioned in these

regulations

Provided further that in the case of financial collateral

included under a collateral arrangement affecting all the property,

present and future, of the debtor, including general hypothecs, the

right of the collateral provider to freely dispose of or otherwise

have possession or control of such financial collateral until the

collateral taker exercises its enforcement rights against such

financial collateral, shall not prejudice the financial collateral

having been provided to the collateral taker as mentioned in these

regulations.

(3) References in these regulations to "writing" include

recording by electronic means and any other durable medium.

(1) The provisions of these regulations shall apply solely

and exclusively to

(a) financial collateral which

consists

of

cash

or

instruments or credit claims;

(b) financial collateral which has been provided and

which can be evidenced in writing; and

(c) financial collateral arrangements which can be

evidenced in writing or in a legally equivalent manner

Provided that the evidencing of the provision of financial

collateral shall allow for the identification of the financial

collateral to which it applies. For this purpose, it is sufficient to

prove that the book entry securities collateral has been credited to,

or forms a credit in, the relevant account and that the cash

collateral has been credited to, or forms a credit in, a designated

account

Provided further that for credit claims, the inclusion of the

claim in a list of claims submitted to the collateral taker in writing,

or in a legally equivalent manner, is sufficient to identify that credit

claim and to evidence the provision of the claim provided as

financial collateral between the parties.

(2) In addition and without prejudice to the foregoing, the

inclusion of the claim in a list of claims submitted to the collateral

taker in writing, is sufficient to identify that credit claim and to

evidence the provision of the claim provided as financial collateral

against the debtor or third parties.

(3) The provisions of Article 7(1) of Financial Collateral

Arrangements Directive and of regulations 6, 7, 8, 9 and 10(1) shall

not apply to

(a) any restriction on the enforcement of financial

collateral arrangements or any restriction on the effect

of a security financial collateral arrangement, any

close out netting or set-off provision that is imposed

by virtue of regulations 59 to 72 of the Recovery and

Resolution Regulations or by virtue of the provisions

under Title V, Chapter III, Section 3 or under Chapter

IV of the CCP RRR or in terms of the relevant

provisions of the Malta Financial Services Authority

Act implementing the said provisions of the CCP

RRR; or

(b) any restriction which

(i)

is imposed in terms of any applicable national

law that facilitates the orderly resolution of

(aa) an insurance company, insurance

undertaking and assurance undertaking in terms of

regulation 4(1)(g);

(bb) a central counterparty, settlement

agent or clearing house, including similar

institutions regulated under national law acting in

the futures, options and derivatives markets to the

extent not covered by Directive 98/26/EC of the

European Parliament and of the Council of 19

May 1998 on settlement finality in payment and

securities settlement systems; or

(cc) a non-natural person, who acts in a

trust or representative capacity on behalf of any

one or more persons that includes any

bondholders or holders of other forms of

securitised debt or on behalf of any institution as

defined in regulation 4(1)(a) to (l); and

(ii)

is subject to safeguards at least equivalent to

those set out in regulations 73 to 80 of the

Recovery and Resolution Regulations or in Title

V, Chapter V of the CCP RRR.

(1) A financial collateral arrangement shall be valid and

enforceable in accordance with its terms and with these regulations.

(2) Article 1357(2) of the Civil Code shall not apply to a

financial collateral arrangement and the terms agreed upon between

the parties shall prevail.

(3) Where any of the provisions of the Civil Code, the Code of

O rg a n i z a t i o n a n d C i v i l P r o c e d u r e , the Companies Act, the

Companies Act (Investment Companies with Variable Share Capital)

Regulations or any other law is in conflict with any of these

regulations, these regulations shall prevail.

The obligations arising out of article 122(10) and (11) of the

Companies Act as well as any obligation to offer shares on a pre-

emptive basis to other shareholders in terms of the Companies Act

(Investment Companies with Variable Share Capital) Regulations do

not apply to to pledges of shares provided in accordance with these

regulations.

(1) For the purposes of these regulations, both the

collateral taker and the collateral provider shall be

(a) a corporation or other legal person, in either case

established by law;

(b) a public authority, including

(i)

public sector bodies of Member States charged

with or intervening in the management of public

debt; and

(ii) public sector bodies of Member States

authorised to hold accounts for customers;

(c) a central bank, the European Central Bank, the Bank

for

International

Settlements,

a

multilateral

development bank as referred to in Annex VI, Part 1,

Section 4 of Directive 2006/48/EC of the European

Parliament and of the Council of 14 June 2006 on the

taking up and pursuit of the business of credit

institutions (recast), the International Monetary Fund

and the European Investment Bank;

(d) a bank or credit institution licensed under the Banking

Act, or otherwise licensed or authorised by a foreign

authority in a recognised jurisdiction or a credit

institution within the meaning of article 4(1) of

Directive 2006/48/EC including the institutions listed

in article 2(1) of that Directive;

(e) an investment services licence holder under the

Investment Services Act, or otherwise licensed or

authorised by a foreign authority in a recognised

jurisdiction or an investment firm within the meaning

of Article 4(1) of Directive 2004/39/EC of the

European Parliament and of the Council of 21 April

2004 on markets in financial instruments;

(f)

a financial institution licensed in terms of the

Financial Institutions Act or a financial institution

within the meaning of Article 4 of Directive 2006/48/

EC;

(g) an insurance company with head office in Malta

authorised in terms of article 7 of the Insurance

Business Act to carry on business of insurance or an

insurance undertaking as defined in Article 1(a) of

Council Directive 92/49/EEC of the 18 June, 1992 on

the

coordination

of

laws,

regulations

and

administrative provisions relating to direct insurance

other than life insurance, an assurance undertaking as

defined in Article 1(1)(a) of Council Directive 2002/

83/EC of 5th November, 2002 concerning life

assurance;

(h) an undertaking for collective investment in

transferable securities (UCITS) as defined in article

1(2) of Council Directive 85/611/EEC of the 20th

December, 1985 on the coordination of laws,

regulations and administrative provisions relating to

undertakings for collective investment in transferable

securities (UCITS) whether licensed in terms of the

Investment Services Act or authorised in a Member

State or EEA State.

(i)

a management company as defined in Article 1a(2) of

Directive 85/611/EEC as amended by Directive 2001/

107/EC;

(j)

any other collective investment scheme or management

company of such scheme which is licensed or recognised

in terms of the Investment Services Act or otherwise

licensed or authorised by a foreign authority in a

recognised jurisdiction;

(k) a securitisation vehicle as defined in article 2 of the

Securitisation Act;

(l)

a central counterparty, settlement agent or clearing house;

(m) a non-natural person who acts in a trust or representative

capacity on behalf of any one or more persons that

includes any bondholders or holders of other forms of

securitised debt or on behalf of any entity as defined in

paragraphs (a) to (l); or

(n) a non-natural person other than the entities mentioned in

paragraph (a), provided that the other party is an entity

as defined in paragraphs (a) to (m).

(2) For the purposes of sub-regulation (1), "public authority"

shall not include publicly guaranteed undertakings except for those

falling within the meaning of subregulation (1)(b) to (i).

(1) Without prejudice to the provisions of regulation 3, the

creation, validity, perfection, enforceability or admissibility in

evidence of a financial collateral arrangement or the provision of

financial collateral under a financial collateral arrangement shall

not be dependent on the performance of any formal act.

(2) Without prejudice to the provisions of regulation 3, when

credit claims are provided as financial collateral the creation,

validity, perfection, priority, enforceability or admissibility in

evidence of such financial collateral between the parties is not

dependent on the performance of any formal act such as the

registration or the notification of the debtor of the credit claims

provided as collateral.

(3) When credit claims are provided as financial collateral, and

without prejudice to the foregoing subregulation, insofar as

validity and enforceability of the financial collateral arrangement

against debtors or third parties is concerned, notice of the financial

collateral arrangement shall be given to the debtor by the collateral

taker or the collateral provider. The notice shall not be necessary if

the debtor has acknowledged the financial collateral arrangement.

(4) When credit claims are provided as financial collateral, for the

purposes of this regulation the debtor shall be deemed to be notified of

the financial collateral arrangement upon any one of the following

events taking place at the option of the collateral taker or the collateral

provider

(a) notification to the debtor in writing; or

(b) on the publication of a notice as follows

(i)

in a daily newspaper circulating wholly or

mainly in Malta, and

(ii) where it appears that the majority of the debtors

reside outside Malta, in a daily newspaper

circulating wholly or mainly in such other

jurisdiction outside Malta; and

(iii) where there is doubt as to where the majority of

the debtors reside, in a daily newspaper which

has wide international circulation.

(5) Such notification shall be effective for all purposes and

effects of the Civil Code with regard to third parties, including the

debtor, as follows

(i)

when notification is made in terms of article 187

of the Code of Organization and Civil

Procedure, on the date of service and the

provisions of the said Code of Organization and

Civil Procedure shall determine such date of

service; or

(ii) when notification is made by mail, two days

after dispatch by mail by the collateral provider

or collateral taker of the notice in writing to the

debtor’s last known address; or

(iii) when notification is made by publication in a

newspaper, the time of the opening of business

in the place of publication of the notice in the

newspaper, or

(iv)

when notification is made by any electronic

means, one day after dispatch of the electronic

notification,

as the case may be, unless the said notice expressly

mentions a later date for the effects to commence.

(6) For the purposes of this regulation, "formal act" includes

any judicial act, registration, notification, note in any public

registry, acknowledgement, advertisement published in any

newspaper or journal, any form of delivery, or any similar act upon

w h i c h t h e c r e a t i o n , v a l i d i t y, p e r f e c t i o n , e n f o r c e a b i l i t y o r

admissibility in evidence of a financial collateral arrangement or

the provision of financial collateral under a financial collateral

arrangement may be dependent

Provided that any act required by law as a condition for

e ff e c t i n g t h e t r a n s f e r o r c r e a t i o n o f a s e c u r i t y i n t e r e s t o n

instruments, other than book entry securities, including

endorsement in the case of credit instruments, or any recording on

the issuer’s register in the case of registered instruments, shall not

be considered as a formal act.

(7) Without prejudice to the provisions on unfair terms in

consumer contracts in the Consumer Affairs Act, debtors of credit

claims may validly waive, in writing

(a) their rights of set-off against the creditors of the credit

claim and against persons to whom the creditor

assigned, pledged or otherwise mobilised the credit

claim as collateral; and

(b) their rights arising from article 34 of the Banking Act

and article 3 of the Professional Secrecy Act in

relation to confidentiality and professional secrecy

that would otherwise prevent or restrict the ability of

the creditor of the credit claim to provide information

on the credit claim or the debtor for the purposes of

using the credit claim as collateral.

(1) On the occurrence of a specified event, the collateral

taker may realise any financial collateral provided under, and

subject to the terms agreed in, a security financial collateral

arrangement as follows

(a) in relation to cash, by setting off the amount against or

applying it in discharge of the relevant financial

obligations; or

(b) in relation to instruments, by sale or appropriation and

by setting off their value against, or applying their

value in discharge of, the relevant financial

obligations;

(c) in relation to instruments consisting of securities of a

SICAV, the financial collateral may also be realised in

the manner and in accordance with the value as

contemplated in regulation 14(6)(iii) of the Companies

Act (Investment Companies with Variable Share

Capital) Regulations; or;

(d) in relation to credit claims, by sale or appropriation

and by setting off their value against, or applying their

value in discharge of, the relevant financial

obligations.

(2) Appropriation shall only be possible if in the security

financial collateral arrangement the parties have specifically agreed

that appropriation may take effect and have agreed, in writing, on

the manner of or mechanism for the valuation of the instruments and

the credit claims.

(3) Unless the parties to a security financial collateral

arrangement otherwise agree, the manner of realising the financial

collateral in terms of sub-regulation (1) shall not require that

(a) prior notice of the intention to realise be given;

(b) the terms of the realisation be approved by any court,

public officer or other person;

(c) the realisation be conducted by sale by auction or in

any other prescribed manner; or

(d) any additional time period must have elapsed.

(4) Unless the parties otherwise agree, the operation of a close-

out netting provision shall not be subject to the requirements listed

in subregulation (3).

(5) The provisions of this regulation shall apply

notwithstanding the provisions of the Civil Code, the Companies

Act, the Companies Act (Investment Companies with Variable Share

Capital) Regulations, or any other law.

(1) The collateral taker may exercise a right of use in

relation to financial collateral provided under the security financial

collateral arrangement if and to the extent that the terms of such

arrangement so provide.

(2) Where the collateral taker makes use of the financial

collateral provided under a security financial collateral

arrangement, he shall

(a) by due date of performance of the relevant financial

obligations, transfer equivalent collateral to replace

the original financial collateral. Such equivalent

collateral shall be subject to the same security

financial collateral agreement to which the original

financial collateral was subject and shall be treated as

having been provided under the security financial

collateral arrangement at the same time as the original

financial collateral was first provided; or

(b) on the due date for the performance of the relevant

financial obligations, set off the value of the

equivalent collateral against or apply it in discharge of

the relevant financial obligations, if and to the extent

that the terms of a security financial collateral

arrangement so provide.

(3) When, following the use of financial collateral, equivalent

collateral is transferred in terms of sub-regulation (2)(a), the rights

of the collateral taker shall remain valid and enforceable in relation

to such equivalent collateral.

(4) Upon the occurrence of a specified event at a time when the

collateral taker has not as yet transferred equivalent collateral in

terms of sub-regulation (2)(a), the obligation to transfer such

financial collateral may be the subject of a close-out netting

provision.

(5) The provisions of this regulation do not apply to credit

claims.

Upon the occurrence of a specified event at a time when

the collateral taker has not as yet, under a title transfer collateral

arrangement, transferred equivalent collateral, the obligation to

transfer such financial collateral may be the subject of a close-out

netting provision.

(1) On the occurrence of a specified event, the collateral

taker shall ensure that any action taken in terms of these

regulations, including any realisation or valuation of the financial

collateral, be conducted in accordance with the terms of the

financial collateral arrangement and in any event in a commercially

reasonable manner and in good faith so as to ensure fair treatment

to the collateral provider and the provisions of articles 122(6) to

122(9) of the Companies Act shall not apply. To the extent that they

conflict with these regulations, the provisions of regulation 14(6) and

(7) of the Companies Act (Investment Companies with Variable Share

Capital) Regulations shall not apply.

(2) Where a collateral taker carries out the realisation or

valuation in terms of sub-regulation (1) and the value of the

financial collateral differs from the amount of the relevant financial

obligations then, as the case may be, the following shall apply

(a) the collateral taker shall reimburse to the collateral

provider the amount by which the value of the

financial collateral exceeds the relevant financial

obligations; or

(b) the collateral provider shall remain liable to the

collateral taker for any amount remaining outstanding

between the relevant financial obligations and the

value of the financial collateral.

(1) A financial collateral arrangement shall be valid and

enforceable in accordance with its terms notwithstanding the

commencement or continuation of winding-up proceedings or

reorganisation measures in respect of the collateral provider or

collateral taker.

(2) Such a financial collateral arrangement and the provision of

financial collateral under such arrangement, shall not be declared

invalid or void or be reversed on the sole basis that the financial

collateral arrangement has come into existence, or the financial

collateral has been provided

(a) on the day of the commencement of winding-up

proceedings or reorganisation measures, but prior to

the order making that commencement; or

(b) in a prescribed period prior to, and defined by

reference to, the commencement of such proceedings

or measures or by reference to the making of any order

or the taking of any other action or occurrence of any

other event in the course of such proceedings or

measures.

(3) Where on the day of, but after the moment of the

commencement of winding-up proceedings or reorganisation

measures -

(a) a financial collateral arrangement has come into

existence;

(b) a relevant financial

obligation

has

come

into

existence; or

(c) financial collateral has been provided,

it shall be legally enforceable and binding on third parties if the

collateral taker can prove that he was not aware, nor ought to have

been aware, of the commencement of such proceedings or

measures.

(4) Where a financial collateral arrangement contains an

obligation to provide financial collateral or additional financial

collateral in order to take account of changes in the value of the

financial collateral or in the amount of the relevant financial

ob ligation s, or where such arran gement con tains a righ t to

withdraw financial collateral on providing, by way of substitution

or exchange, financial collateral of substantially the same value,

the provision of financial collateral, additional financial collateral

or substitute or replacement financial collateral under such an

obligation or right shall not be declared invalid or void or be

reversed on the sole basis that

(a) such provision was made on the day of the

commencement of winding-up proceedings or

reorganisation measures, but prior to the order making

that commencement or in a prescribed period prior to,

and defined by reference to, the commencement of

winding-up proceedings or reorganisation measures or

by reference to the making of any order or the taking

of any other action or occurrence of any other event in

the course of such proceedings or measures; and, or

(b) the relevant financial obligations were incurred prior

to the date of the provision of the financial collateral,

additional financial collateral or substitute or

replacement financial collateral.

(5) Without prejudice to this regulation, the provisions of Title

II of Part V of the Companies Act shall not render invalid or void

the transactions entered into during the period referred to in sub-

regulations (2)(b) and (4)(a).

(1) Any issue arising in relation to book entry securities

collateral with respect to -

(a) the legal nature and proprietary effects of book entry

securities collateral;

(b) the requirements for perfecting a financial collateral

arrangement relating to book entry securities collateral

and the provision of book entry securities collateral

under such an arrangement, and the completion of the

steps necessary to render such an arrangement and

provision effective against third parties;

(c) whether a person’s title to or interest in such book

entry securities collateral is overridden by or

subordinated to a competing title or interest, or a good

faith acquisition has occurred; and

(d) the steps required for the realisation of book entry

securities collateral following the occurrence of an

enforcement event;

shall be governed by the law of the country in which the relevant

account is maintained.

(2) For the purposes of this regulation, the law of a country is a

reference to its domestic law, disregarding any rule under which, in

deciding the relevant issue, reference should be made to the law of

another country.