Cap. Markets & Fin. Regul. News – Bankruptcy remote regimes

Capital Markets & Financial Regulation News – Bankruptcy remote regimes

(“Bankruptcy remote” regimes:From segregation to portability)

“Bankruptcy remote” regimes:
From segregation to portability

Segregation aspects

    • Custodian-level segregation
    • Depositary-level segregationŠ
    • “Clearing”- level segregation: CCPs and Clearing Members
    •  CSD- level segregation

ƒ Right of asset re-use: “Clients’ consent?”

Following Lehman Brothers default case and other
relevant cases, a broad discussion opened with
respect to the securities/collaterals’ right of use or re-
use scenarios.
At a European level, rules on asset re-use and clients’
consent vary a lot: they range from total prohibition of
re-use to the re-use upon a simple consent. MiFID 1
permits the re-use of clients’ assets by investment
firms for the latter’s own account or for the account of
another client upon client’s consent and on the basis
of the conditions agreed with the client. Respectively,
the Greek law 3606/2007 implements MiFID 1 under
the same re-use approach. Such consent is also a pre-
requisite of re-use in the AIFMD regime and the
respective Greek law 4209/2013. It provides for “the
prior consent of the AIF or the AIFM acting on behalf
of the AIF” to enable the depositary re-use the fund’s
(clients’) assets for its own account.

On the contrary, UCITS V explicitly excludes the
option of the re-use of assets in custody by the
depositary for its own account. Re-use, in this case, is
permitted exclusively for the account of the UCITS and
for its own benefit only subject to respective conditions
(e.g. instructions by the management company, high-
quality liquid collateral received by the UCITS etc.).
ƒ “Ex lege” separation from the depositary’s bankruptcy estate
ƒ “Portability” as a further step?
ƒ The Greek example: ATHEXClear Regulation
ƒ Conclusion

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