The Board of the Financial and Capital Market Commission (FCMC) has adopted a decision to authorise the JSC Latvian Central Depository (AS “Latvijas Centrālais depozitārijs”) to provide central securities depository services as from September 18 of this year. The Latvian Central Depository has been maintaining the securities recording and settlement in Latvia to date; however, above authorisation is required under the new European Union (EU) regulatory framework.
With the entry into force of Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (hereinafter – CSDR), increased and more detailed requirements have been set for securities depositories across the EU, including the necessity to obtain authorisation for the provision of services.
Main changes as from 18 September
Though regulatory requirements regarding the operations of the Latvian Central Depository have been already basically laid down in the Law on the Financial Instruments Market, so far it could have been considered as self-regulatory area. The new CSDR requirements determine a range of new common regulatory provisions for activities of depositaries throughout the EU. For example, only the Latvian Central Depository has been recording the securities in public circulation in the books at the highest level in Latvia. CSDR provides for pursuing activities under the freedom to provide services and allows new service providers to enter the market. CSDR also provides for the issuers’ rights to register the issues of securities in any central securities depository that has been authorised under CSDR. Also, there have been no capital requirements set for the Latvian Central Depository. CSDR determines requirements for risk management, investment policy and a number of other requirements. New governance arrangements and rules have been set as well, for example, requirement for mandatory independent audits, establishing of risk management committees – risk committee, audit committee and remuneration committee, as well as opening of the positions of risk compliance officer, technology compliance officer and compliance officer that should be separate individuals. CSDR also provides for new requirements in the IT area, more detailed recording requirements as well as requirements for maintenance of information about the participants and data on recorded securities.
Until now, only banks, investment firms and investment management companies were entitled to open their securities accounts with the Latvian Central Depository, but the new regulatory framework stipulates that any Latvia’s resident may request a bank or investment firm to open an account with the Latvian Central Depository, where their securities are held separately.
Moreover, additional obligations are laid down on the FCMC by the new regulatory framework In monitoring the activities of the Latvian Central Depository, the FCMC will now carry out the assessment of its strategy, systems, processes and procedures in place at least once a year. Licensing of new service providers in the field, evaluation of their business continuity plan, development of resolution plan, as well as handling complaints about the activities of depository, for example, refusals to provide services, will be also within the FCMC’s remit.
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