New rules for securities custodianship to attract more players – BSP

Published June 11, 2021, 2:13 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the newly-approved circular amending the rules on securities custodianship and securities registry operations will bring more investors and increase industry participants to further develop the local capital market.

Diokno said it will also expand investment opportunities and enhance protection to the investing public.

“The new rules will attract more players in the industry while ensuring that only BSP-supervised financial institutions (BSFIs) with robust risk management and governance systems as well as appropriate information technology infrastructure will offer securities custodianship and securities registry services,” he added.

The new rules, approved as Circular No. 1121 last June 8, prescribe the measures to strengthen client/investor protection by setting the supervisory expectations on disclosure and reporting requirements to clients, the conduct of customer due diligence, and record keeping.

The BSP said the amendments to the regulations on securities custodianship and securities registry operations will simplify the licensing process and will increase the number of both client base and companies offering securities custodianshop and securities registry.

According to the circular, BSFIs that intend to engage in securities custodianship and securities registry operations will only need to notify the BSP and to submit a certification of compliance with the prudential criteria and pre-qualification requirements.

These pre-qualification requirements will ensure independence of the securities custodianship operations from the securities underwriting, dealing, or brokering operations of the BSFIs, as well as having a strong information technology infrastructure to support securities custodian and registry operations.

The BSP also set new rules for BSFIs to perform securities custodianship and registry services for a related party so long that appropriate safeguards and controls on related party transactions are adopted to avoid conflict of interest.

“Further, the amended rules provide an option for a securities seller to perform self-managed securities custodianship arrangement where securities sold to or managed on behalf of a BSFI’s clients to be maintained under a BSFI’s own unit performing securities custodian services, subject to compliance with the minimum prudential controls. Such BSFIs are however prohibited from performing securities custodianship/ registry services to its own securities issued,” said the BSP.