Finance Norway’s response to the public consultation on Central Securities Depositories (CSDs) and on the harmonization of certain aspects of securities settlement in the European Union

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Finance Norway’s response to the public consultation on Central Securities Depositories (CSDs) and on the harmonization of certain aspects of securities settlement in the European Union

European Commission
Internal Markets and Services DG
B-1049 Bruxelles

Date: 02.03.2011

Information about the respondent:

FNO - Finance Norway
Hansteensgt. 2 Oslo
P.o. Box 2473 Solli
N-0202 Oslo, Norway

Phone +47 23284200

Field of activity of the respondent

Finance Norway (FNO) was established in 2010 by the Norwegian Savings Banks Association and the Norwegian Financial Services Association and represents some 180 financial institutions operating in the Norwegian market.

General remarks

FNO welcome the initiative for a harmonized EU-legislation regarding CSDs in their role as infrastructure providers and important settlement system operators. However, a new legislation should to take into account that domestic markets may have established efficient and well functioning systems for CDSs and the holding of securities. The future legislation should therefore be flexible and not prevent the continuance of such systems.  For the Norwegian market, and also the Nordic Markets as we are aware of, it’s important that our model for CSD’s can be upheld, including the use of so called “account operators” which act on behalf of the CSD. Both commercial banks and savings banks operate as account operators, and it’s important that this can continue under a new legislative regime.

The Norwegian holding system may be described as a central register of rights in securities operated by the VPS (a CSD), and to a great extend maintained decentralized by intermediaries (mainly banks and investment firms as account operators). This is as we believe similar to the Danish model. Rights and liabilities for the banks and investment firms maintaining an investor´s accounts is regulated in a contractual arrangement between VPS and each bank/ investment firm. This contractual agreement is approved by the Financial Supervisory Authority of Norway, The Norwegian FSA). The sharing of functions are permitted by § 6-5 of the Securities Register act.  Accordingly the intermediary is acting on VPS’ behalf and not themselves, performing the functions of notary and central safekeeping. VPS is still directly responsible towards the investor. It is our opinion that this model and the operating of accounts by account operators, should be accepted in a forthcoming EU-legislation.

Response to specific questions:

1. What is your opinion on the scope of the possible legislation and providing for any exemptions (such as for central banks, government debt management offices, transfer agents for UCITS, registrars, account operators)? 

FNO agrees that account operators should not be included in the scope of the CSD directive and that they should be exempted from the scope of the future legislation.

40. Should there be any other exemptions from the principle of responsibility and control of CSDs on outsourced tasks?

As mentioned above, the Norwegian model must be characterized as direct holding systems, and there is a clear need to use account operators for the establishing and maintaining of accounts of both issuers and investors in the market they serve. All the core functions of CSDs are centralized in the CSD itself, but the updating of information that the central systems of VPS are processing are performed by account operators. The responsibility to investors and issuers for the tasks carried out by the account operators remain, as explained above, with the CSD. This is the case in Norway and as we understand in other “direct holding”-models. It is important that banks and other institutions can act as “account operators” under the current domestic framework, and that a new legislative regime will not prevent this.

Yours sincerely,
Finance Norway

Tor Johan Bjerkedal
Director                                                  Liv Tove Bakken
                                                              Senior Legal Advisor