AMEDA Leadership Forum Egypt

1. AMEDA Leadership Forum Egypt Overview of the requirements for compliance with G30, the Implications for CSDs of Unidroit and the Hague Conventions PRESENTED BY: Anne Njoroge DATE: Monday, 27 April 2009

2. INTERNATIONAL ORGANISATIONS • International activity in the post-trade clearing and settlement arena: • Group of Thirty • Giovannini Group • ISSA • Hague Conference on Private International Law • UNIDROIT • Conventions: Hague and UNIDROIT

3. Group of Thirty • Consultative Group on International, Economic and Monetary Affairs • Private non-profit, international body with representatives from public and private sectors • Examines international economic and financial issues • Recommendations to improve the safety and efficiency of international securities markets

4. G30 Recommendations: Interoperable global network • Eliminate paper and automate communication, data capture, and enrichment. • Harmonize messaging standards and communication protocols. • Develop and implement reference data standards. • Synchronize timing between different clearing and settlement systems and associated payment and foreign-exchange systems. • Automate and standardize institutional trade matching. • Expand the use of central counterparties. • Permit securities lending and borrowing to expedite settlement. • Automate and standardize asset servicing processes, including corporate actions, tax relief arrangements, and restrictions on foreign ownership.

5. G30 Recommendations: Mitigating Risk • Ensure the financial integrity of providers of clearing and settlement services. • Reinforce the risk management practices of users of clearing and settlement service providers. • Ensure final, simultaneous transfer and availability of assets. • Ensure effective business continuity and disaster recovery planning. • Address the possibility of failure of a systemically important institution. • Strengthen assessment of the enforceability of contracts. • Advance legal certainty over rights to securities, cash, or collateral. • Recognize and support improved valuation and closeout netting arrangements.

6. G30 Recommendations: Improving Governance • Ensure appointment of appropriately experienced and senior board members. • Promote fair access to securities clearing and settlement networks. • Ensure equitable and effective attention to stakeholders’ interests. • Encourage consistent regulation and oversight of securities clearing and settlement service providers.

7. Giovannini Group • Group of financial markets experts • Advises European Commission on harmonisation of rules, regulations and practices for a single EU financial market • Lack of harmonisation creates barriers to cross-border clearing and settlement

8. International Securities Services Association ISSA • Formed as association of securities administrators from around the world • Key objective is to share professional knowledge in the securities industry • 89 member institutions from 48 countries • Members include infrastructure providers and users

9. Hague Conference on Private International Law • International organisation • Purpose: working for progressive unification of rules of private international law • AME Member States: Egypt (1961), Israel (1964), Morocco (1993), Jordan (2001) and South Africa (2002) • Hague Conventions: multilateral treaties

10. Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary • Convention signed by Switzerland and the United States (2006), and Mauritius (2008) • Provides legal certainty and predictability as to the law applicable to securities held through intermediaries • Facilitates international flow of capital by reduction of legal risk and associated costs in relation to cross-border securities transactions

11. Hague Convention • Traditional conflict of law approach: law of the place where securities are located • Unsatisfactory: requires “look-through” various layers of intermediaries to level of issuer or register • Uncertainties in “look-through” approach • Place of relevant intermediary approach • Express agreement on governing law between account holder and intermediary, subject to qualifying office requirement • Fall-back provisions

12. Hague Convention: Scope • Law determined in accordance with Convention is applicable to the following issues: • Legal nature and effects of rights resulting from credit of securities • Legal nature and effect of disposition of securities • Requirements, if any, for perfection of disposition of securities • Priority of interests and effects • Duties of intermediary with regard to competing interests • Realisation of interest in securities • Disposition of securities and entitlements to dividends, income, or other distributions

13. UNIDROIT • United Nations International Institute for the Unification of Private Law • Inter-governmental organisation - Rome • Examines ways of harmonising and co-ordinating private law of States • AME Member states: Egypt (1951), Israel (1954), Nigeria (1964), South Africa (1971), Tunisia (1980) and Saudi Arabia (2009)

14. UNIDROIT Draft Convention on Substantive Rules Regarding Intermediated Securities • International legal instrument to improve the legal framework for securities holding, transfer and securities lending and borrowing • Provides basic legal framework for modern intermediated securities • Limitation and management of systemic risk • Supports intergration and competitiveness in financial markets • Enhancement of cross-border interconnectivity of systems International treaty • Upon ratification, becomes “hard law” overriding domestic law • Need for harmonisation of domestic law with Convention • Convention allows “carve out” provisions through Declarations • Member States may denounce Convention after 12 months notice

15. UNIDROIT Draft Convention: Scope • Transparent and non-transparent systems of uncertificated securities holding through intermediaries • Intermediated securities - intermediaries may include banks, brokers, financial institutions and the central depository • Applies when transfer, pledge etc, take effect through book-entries • Does not apply to: • issuer activities • corporate law issues • supervisory issues

16. UNIDROIT Draft Convention • Potential legal risk in exercising rights through layers of intermediaries • Concept of ownership: CSD holding in omnibus accounts or segregated accounts for end-investors • UNIDROIT Convention caters for both transparent and non-transparent holding patterns • UNIDROIT Convention delegates operational issues to settlement system rules

17. UNIDROIT Draft Convention: Key Issues • Transfer of intermediated securities • Rights resulting from credit of securities to a securities account • Finality of book entry transfers • Irrevocability of instructions • Protects good faith acquirer of securities • Priority ranking among competing interests • Preclusion of upper-tier attachment • Insolvency • Loss-allocation • Collateral (Optional)

18. UNIDROIT Draft Convention: Impact for CSDs • Intermediary • Transparent or non-transparent • Settlement rules

19. Hague Convention and UNIDROIT Draft Convention • Ensure reduction of legal uncertainty in cross-border transactions • Hague Convention determines which law will apply • UNIDROIT Convention promotes the harmonisation of substantive domestic law: • Chosen domestic law should be clear and reliable • Chosen domestic law should be compatible with the law of other jurisdictions

20. THANK YOU AND QUESTIONS? Anne Njoroge Legal Counsel Strate Ltd annen@strate.co.za +27 11 759 5318 www.strate.co.za