Regulatoty Update

UniCredit Bank S.A.
Summary: 
Romanian ASF released Regulation 6/2016 amending and supplementing Regulation 32/2006 on financial investment services as well as Regulation 5/2010 on the use of the global accounts
Wed, 25/05/2016

The Financial Supervisory Authorithy approved the amendments to the regulation 32/2006 on financial investment services and regulation 5/2010 on the use of the global accounts. According to the new rules:

  • the financial instrument lending operations may be performed only for the following purposes:

- to perform short selling transactions, including the short selling of financial instruments which were borrowed by intermediaries and lent to clients for that
purpose;
 
- to perform operations in the margin account;
 
- to complete the settlement of transactions, if an intermediary providing custody services does not send the transfer order corresponding to the instruction for the settlement of an allocation transaction to the central depository;
 
- to complete the settlement of the transactions, in the event that, on the settlement date, it is found that the financial instruments are not available for settlement (they are not transferred from the system of another central depository or of an international financial institution with which the central depository has established electronic links, by an instruction of transfer without changing ownership);
 
- in the context of the market maker activities;
 
- to perform settlement operations of the derivatives involving physical delivery;
 
- in the context of exercising the role of authorised participant of a tradable UCITS or of managing a tradable UCITS;
 
- in any other situation, to complete the settlement, in which case the central depository shall immediately notify FSA and shall apply the proper sanctions, in accordance with its own regulations.

  • It is prohibited to borrow financial instruments exclusively to obtain dividends or exercise votes in general meetings of shareholders.
  • The intermediaries responsible for the ongoing monitoring of the operations whereby financial instruments are lent and associated collateral established, in terms of compliance with the applicable legal provisions.
  • Funds resulting from settlement of a short sale based on borrowed financial instruments is considered an asset of the customer and therefor a margin to secure the loan. After settlement of the short sale transaction, the funds set as margin could be replaced by other financial instruments at the same amount. Assets constituted as margin may not be lent.
  • If the issuing company distributes dividends or interest on financial instruments during the loan period, the respective payment shall be made by the borrower to the lender.

   The Regulation 6/2016 amending and supplementing Regulation 32/2006 on financial investment services as well as Regulation 5/2010 on securities lending operations and short selling will become effective 60 days after it is published in the Official Gazette. Until entry into force of this Regulation, the market operators, central securities depositories and intermediaries shall issue its own regulations to implement this Regulation.

Impact on investors: The Romania ASF aims to streamline securities lending operations and short selling transactions on the Romanian market, aligning the local market legal framework to the EU Regulation 236/2012 on short selling and credit default swaps.