The Bangko Sentral ng Pilipinas (BSP) is proposing to streamline the licensing and relax the independence requirements for securities custodians to increase the number of capital market players.
The BSP wants to delete the term “third party” that refers to third party custodianship, and the changes cover securities custodianship and securities registry operations for banks and non-bank financial institutions.
“The amendments are in line with the commitments of the Bangko Sentral to contribute to the deepening of the domestic capital market,” said BSP Governor Benjamin E. Diokno in the proposed circular amending the regulations on securities custodianship and securities registry operations. The draft circular is currently being circulated for industry comments.
At least five sections in the existing circular as it relates to third party custodian or registry will have the third party term deleted, and these involved special banking authorities, rediscounting window for small banks, in the administration of unit investment trust funds, collateralized transactions, and Bureau of the Treasury (BTr) obligations in a memorandum of agreement.
Securities custodian, as described by the BSP, is a BSP-accredited financial institution “designated by the investor to perform the functions of safekeeping, holding title to the securities in a nominee capacity, reports rendition, mark-to-market valuation, collection and payment of dividends, interest earnings or proceeds from the sale/redemption/maturity of securities held under custodianship and representation of clients in corporate actions.” It could also act as securities lending agent.
The BSP is proposing to delete the condition that third party BSP-accredited securities registry and securities custodian should not be part of the same financial conglomerate or banking group that is issuing the securities, or seller of securities held under custody in the case of custodians.
The BSP said a bank, a quasi bank or non-bank financial institution which has been accredited as securities custodian can continue to hold securities it sold under a “self-managed securities custodianship arrangement” so long as the custodianship function is “separate and independent” from its underwriting and brokering functions. A self-managed custodianship arrangement is a dealer underwriting the securities custodianship “without the need to deliver the securities to a third party securities custodian.”
The securities registry, on the other hand, is a duly authorized financial institution “designated or appointed by the issuer to maintain the securities registry book either in electronic or in printed form” and “records the initial issuance of the securities and subsequent transfers of ownership and issues registry confirmation to the buyers/holders.”
The BSP is also proposing to revise the securities custodianship and securities registry operations of trust corporations and to delete the “third party” term in respect to the securities custodian operations. Also proposed is the renaming of the BTr registry of scripless securities or RoSS to NRoSS by adding the word “national”.
The proposed circular is changing the guidelines implementing the delivery of securities by the seller to the buyer or his/her designated securities custodian and central securities depository such as accrediting only those engaged in the trust business. A securities registry is also a duly authorized third party financial institution and a central securities depository – which provides securities accounts, central safekeeping and asset services — is duly-authorized by the Securities and Exchange Commission.