Federal Act on the Custody and Transfer of Securities Held with an Intermediary

Transcription

1 Federal Act on the Custody and Transfer of Securities Held with an Intermediary (Intermediary-Held Securities Act, the IHS Act ) of 200 The Federal Assembly of the Swiss Confederation, Considering Articles 26, 98.1 and of the Federal Constitution 1, Considering the Federal Council s message of 200_ 2 decrees as follows: Chapter 1: Purpose, Scope and Definitions Article 1 Purpose 1 This Act creates a uniform legal basis for the custody of certificated and uncertificated securities by financial intermediaries as well as for the transfer of such securities. The Act guarantees the property rights of investors and contributes to the efficient settlement of securities transactions and to the stability of the financial system. 2 By taking into account internationally recognized standards, this Act ensures legal predictability in the settlement of cross-border securities transactions. Article 2 Scope of application 1 The Act shall apply to intermediary-held securities that are credited or debited to a securities account by a depository. 2 In particular, the Act shall not apply to: a. The custody of certificated securities held under a separate and identifiable description for each investor (individual custody); b. The custody of certificated securities or global certificates of which the investor has direct possession (private deposits); c. The custody of certificated securities, global certificates or dematerialized securities by their issuer, unless the latter is a depository (within the meaning of the Act). Article 3 Subject Matter The Act shall govern: 1 RS FF.

2 a. The creation and extinction of intermediary-held securities and changes from one form of holding to another (Chapter 2); b. The custody of intermediary-held securities by a depository within the meaning of this Act (Chapter 3); however, the Act shall not apply to the relationship between the account holder and the issuer, nor to the registration of holders of registered shares in the shareholders register; c. The sale or other disposal of intermediary-held securities (Chapter 4); and d. The depository s liability resulting from the custody and transfer of intermediary-held securities (Chapter 5). Article 4 Securities held with an Intermediary 1 Intermediary-held securities within the meaning of this Act shall include monetary and voting rights of a fungible nature against an issuer: a. Which are credited to a securities account and of which the account holder may dispose pursuant to the provisions of this Act; and b. Which may be asserted against the depository and any third parties; in particular, such rights are beyond the reach of the depository s creditors. 2 Intermediary-held securities within the meaning of the Act shall also include any financial instrument or right pertaining to such financial instrument, the custody of which is governed by a foreign law and to which such law confers a comparable function. Article 5 Depositories 1 The following are depositories within the meaning of this Act: a. Banks within the meaning of the Banking Act of 8 November ; b. Brokers within the meaning of the Stock Exchange Act of 24 March ; c. Fund managers within the meaning of the Investment Fund Act of 18 March , insofar as they manage unit accounts; d. Operators of securities clearing and settlement systems within the meaning of Article 20.2 of the National Bank Act of 3 October , provided such systems are of significance to the stability of the financial system; e. The Swiss National Bank within the meaning of the National Bank Act of 3 October ; and f. The Swiss Post within the meaning of the Postal Organization Act of 30 April Foreign banks, brokers, central depositories and other financial intermediaries who hold securities accounts in the course of their business activity shall also be deemed depositaries. 3 RS RS RS RS RS RS 783.1

3 Article 6 Other Definitions In the Act, the following terms shall have the following meanings: a. Securities account: an account maintained by a depository to which intermediary-held securities can be credited or debited; b. Account holder: a person or group of persons in whose name a depository maintains a securities account; in respect of the intermediary-held securities belonging to the depository, the latter is itself the account holder; c. Client: an account holder other than the depository who keeps the account; d. Certificated securities in collective deposit: certificated securities in custody pursuant to Article 973a of the Code of Obligations 9 ; e. Global certificate: a certificated security within the meaning of Article 973b of the Code of Obligations 10 ; f. Uncertificated securities: rights within the meaning of Article 973c of the Code of Obligations 11. Chapter 2 Creation, Extinction and Conversion of Intermediary-held Securities Article 7 Creation 1 Intermediary-held securities are created: a. When a depository accepts certificated securities for global custody and credits them to a securities account; b. When a depository accepts global certificates for custody and credits the corresponding rights to a securities account; c. When a depository registers uncertificated securities in the main register and credits the corresponding rights to a securities account. 2 The creation of an indirectly held security does not alter the investor s rights against the issuer. 3 For each issue of uncertificated securities, a single depository shall maintain the main register. This register shall provide details of the issue, the quantity, and the par value of the rights issued. The register shall be available for public consultation. Article 8 Authorization to place in custody with other depositories 1 Even without the account holder s consent, any depository is authorized to place intermediary-held securities, certificated securities and uncertificated securities in custody with another depository in Switzerland or abroad. 2 The account holder s express consent is required: 9 RS RS RS 220

4 a. Where the foreign depository is not subject to adequate regulatory supervision; or b. Where the account holder has expressly required certificated securities to be held in the custody of the account holder s depository. Article 9 Conversion 1 Save where otherwise provided in the issue terms or the issuer s articles of association, the issuer may, at any time and without the account holder s consent, convert the securities on deposit with a depository in the form of certificated securities in collective custody, a global certificate or uncertificated securities, into another form. The issuer shall bear the conversion cost. 2 Insofar as provided by the issue terms or the issuer s articles of association, the account holder may at any time require the issuer to deliver certificated securities in the quantity and of the kind corresponding to the intermediary-held securities registered in the account holder s account based on a global certificate or uncertificated securities. The account holder shall bear the cost of this conversion unless the issue terms or the issuer s articles of association provide otherwise. 3 The depository shall ensure through appropriate procedures and effective controls that the conversion of the securities does not alter the total amount of the pecuniary and voting rights issued. Article 10 Extinction and Delivery 1 The account holder may at any time require the depository to deliver certificated securities in quantity and kind corresponding to the intermediary-held securities registered in the account holder s account where: a. The corresponding certificated securities are held in custody by a depository; or b. The account holder is entitled to delivery of the certificated securities pursuant to Article The account holder shall bear the cost of this delivery unless the issue terms or the issuer s articles of association provide otherwise. The account holder shall be entitled to the delivery of certificated securities in accordance with the custom and usage of the market on which the securities are traded. 3 The depository shall ensure that the delivery to the account holder occurs only after the corresponding securities have been debited to the latter s securities account. Chapter 3: Custody of the Securities Article 11 Available securities 1 Each depository shall hold in its own custody, or with another depository, securities (available securities) in the quantity and kind corresponding at minimum to the total of the securities credited to the securities accounts that the depository maintains for its clients. 2 The following are deemed to be available securities within the meaning of the foregoing paragraph:

5 a. Intermediary-held securities credited to a securities account that the depository maintains with another depository; b. Securities that the depository itself holds in its own custody in the form of certificated securities, a global certificate or uncertificated securities entered in the main register; and c. Readily available rights to delivery of securities from other depositories during the regulatory or customary settlement period for the corresponding market, provided that the period shall not exceed eight days. 3 If the total quantity of securities available for delivery amounts to less than the total quantity of securities credited to the depository s client accounts, the depository shall forthwith acquire the missing securities. Article 12 Segregation of own securities and client securities 1 If the depository holds securities of its own and securities belonging to clients in separate securities accounts with another depository, the securities and rights to delivery of securities of any account holder whose security account is held by the first depository shall not be affected by: a. A set-off agreement between the account holder s depository and the other depository, to which the account holder is not a party; b. Any security interest, right of pledge, retention, or foreclosure of the other depository or of a third party to which the account holder has not consented. 2 The depository may not dispose of an account holder s securities prior to transferring them from the account holder s account to its own account by exercising its right of use or subpledge pursuant to Article 14 or Article Any agreement to the contrary shall be invalid. Article 13 Right of Retention and Foreclosure 1 In accordance with Article 25, the depository shall be entitled to foreclose on securities credited to a securities account to recover any due debt owed by the account holder arising out of the custody of the intermediary-held securities or the financing of their acquisition. 2 The depository s right of retention and foreclosure shall cease when the latter credits the securities to the account of another account holder or transfers them to another depository. Article 14 Right of use 1 An account holder may authorize its depository to dispose in its own name and on its own behalf of the securities credited to the holder s account. 2 The authorization must be granted in writing; it cannot be included in the general terms and conditions.

6 Article 15 Sub-pledge 1 An account holder may authorize a depository, in writing, to pledge or dispose of the securities that the account holder has pledged or transferred as collateral to the depository. 2 By exercising this right, the depository undertakes to hold the same quantity and kind of securities at the account holder s disposal at the latest when the secured debt has matured. If so provided in the agreement creating the collateral, the depository may foreclose on the securities in accordance with Article Securities within the meaning of Article 15.2, first sentence, shall be subject to the same collateral constraints as those they replace and shall be treated as though no replacement had occurred. Article 16 Statements An account holder may at any time require its depository to draw up a statement of the securities registered in the account. This statement is an evidentiary document, not a certificated security. Article 17 Exclusion from insolvency 1 If the depository becomes the object of proceedings for liquidation, insolvency or composition, the competent authority shall exclude from the depository s estate, to the extent of the securities credited to the latter s client accounts: a. Intermediary-held securities credited to a securities account held by the depository with another depository; b. Securities that the depository itself holds in the form of certificated securities, a global certificate or uncertificated securities registered in its main register; c. The depository s readily available rights to receive delivery of securities from third parties resulting from spot transactions, expired futures transactions, hedging transactions or issues on behalf of account holders. 2 If the depository does not hold its own securities and those of its clients in separate securities accounts with another depository, the securities credited to those accounts shall be presumed to belong to the depository s clients. 3 For each account holder, the exclusion shall be carried out by transferring the intermediaryheld securities and rights to receive delivery of securities to the depository appointed by the account holder or by delivering the certificated securities to the account holder. The foregoing is without prejudice to the depository s claims pursuant to Article If another depository within the meaning of Article 8 becomes the object of insolvency proceedings, composition, or other compulsory liquidation proceedings, the depository shall invoke the exclusion in favor of its account holders. 5 This Article shall not affect the validity or effectiveness of any prior agreement under which, in the event of inability to pay, bankruptcy, liquidation or similar circumstances, a depository or an account holder is not entitled to receive or is not bound to pay more than the difference between the unrealized gains and losses on the transactions covered by the agreement (Closeout-Netting).

7 Article 18 Shortfall 1 If the securities to be excluded pursuant to Article 17 are not sufficient to satisfy the account holders in full, securities of the same kind held by the depository for its own account shall also be excluded insofar as necessary, even where such securities have been held separately from the clients securities. 2 If the account holders are still not fully satisfied, they shall bear the shortfall in proportion to the shortfall balance of the securities of the missing kind credited to their account. They shall obtain a corresponding claim against the depository for compensation of their loss. Article 19 Seizure and attachment 1 Where intermediary-held securities are seized, attached, or subjected to another interim measure against the account holder, such measure shall be executed exclusively in the hands of the depository maintaining the securities account to which the account holder s securities are credited. 2 Any seizure, attachment, or other interim measure executed against an account holder in the hands of a depository other than that referred to in paragraph 1 above shall be invalid. Chapter 4: Disposition of Intermediary-held Securities and Effects on Third Parties Section 1: Disposition Article 20 Instructions 1 The depository is bound to carry out the account holder s instructions disposing of the latter s securities pursuant to the contract binding both parties. 2 The depository shall not be obliged or entitled to verify the legal grounds for the instructions. 3 An instruction shall be irrevocable when it can no longer be revoked under the contract binding the account holder and the depository, or according to the rules of the settlement system used for the securities, and at the latest once the account holder s securities account with the depository has been debited. Article 21 Disposition 1 The disposition of intermediary-held securities occurs and may be asserted against third parties where: a. The account holder has instructed its depository to transfer the securities to the transferee; and b. The securities have been credited to the transferee s account. 2 The transfer is completed when the credit provided for in paragraph 1 occurs. If the transfer pertains to the ownership of the securities, this moment is also decisive for the transferor.

8 3 The foregoing is without prejudice to the provisions governing the acquisition by virtue of marital property law, inheritance, merger, or enforcement proceedings. 4 This Article shall not affect restrictions on the transfer of registered shares imposed by their issue terms, the issuer s articles of association or applicable company law. No other transfer restrictions may be asserted against the transferee or third parties. Article 22 Pledges and usufruct 1 Intermediary-held securities may be pledged and the pledge may be asserted against third parties either in accordance with Article 21, or by a written agreement in which the depository undertakes to the pledgee carry out the latter s instructions without the need for further consent or cooperation of the account holder. 2 A pledge in favor of the depository is constituted and may be asserted against third parties as soon as it is agreed in writing with the account holder. It is extinguished when the securities are credited to another holder s account or transferred to another depository. 3 A pledge may pertain to: a. Specific securities; b. All the securities credited to an account; or c. Part of the securities credited to an account up to a specified financial value. 4 Paragraph 1 shall also apply to the creation of a usufruct. Article 23 Debit Reversal 1 A debit to a securities account may be reversed if it took place without instructions or on the basis of an instruction: a. That is invalid; b. That was not issued by the account holder or the latter s representative; c. That was erroneously declared or transmitted; or d. That was revoked in due time by the account holder. 2 The reversal shall place the account holder in the position he would have occupied if the debit had never occurred. 3 Instead of the reversal, the account holder may require the value of the securities at the time of the debit. 4 There is no right to reversal or to the value of the securities if the depository proves that it was not aware of the defect in the instruction and could not have recognized such defect even though it had implemented reasonable measures and procedures for that purpose. 5 Claims based on this Article shall become time-barred one year after the defect is discovered, or at the latest five years after the debit date. Article 24 Credit Reversal 1 To the extent that a credit is not based on or deviates from an instruction, the depository may reverse it by giving notice to the account holder.

9 2 Reversal cannot occur where the account is not in credit for a corresponding amount of securities of the same kind. In this event, the depository has the right to the value of the credited securities if the account holder has disposed of the securities in bad faith, or if the account holder should have known, when disposing of them, that he might be obliged to make restitution. 3 Claims based on this article shall become time-barred one year after the defect is discovered, or at the latest five years after the credit date. Article 25 Realization of collateral 1 The beneficiary of a security interest to whom intermediary-held securities traded in an organized market have been pledged or transferred pursuant to this Act may realize them according to the conditions stipulated in the agreement creating the security interest: a. By selling them and offsetting the proceeds against the secured debt; or b. By appropriating them and offsetting their value against the secured debt. 2 This right shall not be affected by the commencement of liquidation, bankruptcy, or composition proceedings against the provider of the security. 3 The secured party shall give notice to the provider of the security before realization. A provider of security who is an institutional or qualified investor may waive the notice requirement. 4 The beneficiary of the secured interest shall account to the provider of the security and remit to the latter any excess proceeds of the realization. 5 The depository shall not be bound or entitled to verify whether the conditions for realization of the pledge have been fulfilled. 6 The foregoing is without prejudice to the liability of the beneficiary of a security interest who realizes securities where the conditions for realization have not been fulfilled. 7 Intermediary-held securities not traded on an organized market shall be realized in accordance with Articles of the Debt Enforcement and Bankruptcy Act of 11 April Section 2: Effects on Third Parties Article 26 Protection of the bona fide purchaser 1 A third party who acquires securities for value and in good faith pursuant to Articles 21 or 22 shall be protected in respect of the acquisition even if it results from a faulty instruction or if the transferor did not have the power to alienate the securities. 2 If the third party who acquires the securities is not protected in respect of the acquisition, he must restore intermediary-held securities of the same quantity and kind pursuant to the rules of the Code of Obligations on unjust enrichment 13. The rights of third parties shall not be affected. The foregoing is without prejudice to other claims based on the Code of Obligations. 12 RS RS 220

10 3 Where the transferee who is bound to make restitution of the securities becomes the subject of liquidation, bankruptcy or composition proceedings the beneficiary may require intermediary-held securities of the same quantity and type to be excluded from the transferee s estate to the extent that it contains such securities. 4 Claims based on this Article shall be time barred one year after the holder of the debited account becomes aware of his rights and of the identity of his debtor, or at the latest ten years after the debit date. Article 27 Priorities 1 The depository s right of pledge, retention, or realisation shall prevail over any other rights in respect of the same securities. 2 For dispositions based on other provisions of this Act, the first in time shall prevail. 3 Where intermediary-held securities or a right over intermediary-held securities are assigned, the rights acquired pursuant to the provisions of this Act shall prevail over the assignee s rights, regardless of the time of the assignment. 4 The foregoing shall be without prejudice to agreements to modify the priorities of rights over intermediary-held securities; such agreements shall be effective only as between the parties bound by them. Chapter 5: The Depository s Liability Article 28 The depository s liability 1 The depository shall be liable for the damage caused to an account holder by the custody or transfer of intermediary-held securities according to the rules of the Code of Obligations insofar as they are not modified by this Article. 2 A depository who holds intermediary-held securities with another depository in accordance with Article 8 shall be liable for the care with which it chooses and instructs the other depository and for the care with which it has verified that the selection criteria continue to be complied with. The depository may exclude this liability if the account holder has expressly designated the other depository contrary to the depository s advice.

11 3 The depository shall be vicariously liable for the acts of third parties who: a. Independently and durably handle the administration and settlement of the securities on behalf of the depository; or b. Form an economic entity with the depository. 4 Agreements to the contrary shall be valid only as between depositories. Chapter 6: Final and Interim Provisions Article 29 Amendments to existing law The amendments to existing law are stated in the Schedule hereto. Article 30 Interim provisions 1 Issuers of uncertificated securities credited to securities accounts held by depositories shall ensure that such uncertificated securities are registered in the depository s main register within six months from the effective date of this Act. 2 If, before this Act takes effect, certificated securities in a global deposit, global certificates, or uncertificated securities held by a depository are transferred in a manner that fails to comply with the requirements of this Act, the right thus created shall prevail over any right created after the effective date of the Act provided that the beneficiary effects or causes the registrations required by the Act to be effected within 12 months after the effective date hereof. Article 31 Referendum and effective date 1 The Act shall be subject to an optional referendum. 2 The Federal Council shall set the effective date.

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13 Schedule Amendments to Existing Law The Acts referred to below shall be amended as follows: 1. Code of Obligations 14 Article 622 C. Shares I. Kind 1 The shares shall be either registered or bearer shares. Similarly, shares issued or held in the form of intermediary-held securities within the meaning of the Act on Securities held with an Intermediary of 200_ 15 shall be either registered or bearer shares. Article 627 E. Articles of Association II Miscellaneous Provisions 1. General Provisions concerning the following shall be valid only if included in the articles of association: 14. The possibility of converting shares issued in one form into another form as well as the distribution of costs resulting from this conversion, insofar as these rules contravene the Act on Securities held with an Intermediary of 200_ 16 Art 685f Transfer of title (new paragraph 1) 1 Where registered shares traded on a stock exchange are transferred, title shall pass to the transferee by virtue of their transfer. Title Thirty-three: registered securities, bearer securities, instruments issued to order Chapter One: General Provisions New margin title: G. Global deposits, global certificates and uncertificated securities Article 973.a Global Deposit of Certificated Securities 14 RS RS 16 RS

14 1 The depository is authorized to keep in joint custody fungible certificated securities belonging to several depositors unless a depositor expressly requests his securities to be held in separate custody. 2 Where a depositor delivers certificated securities to a depository for custody in a global deposit, the depositor shall acquire a right of joint ownership over all securities of the same kind placed in the same deposit. The depositor s interest shall be proportional to the par value or, failing such value, to the quantity of the securities he has deposited. 3 A depositor may at any time, without the cooperation or agreement of the other depositors, require delivery of certificated securities from the global deposit corresponding to his proportionate interest therein. Article 973.b Global Certificates 1 An issuer may replace fungible certificated securities held in custody by the same depository with a global certificate provided that the conditions of issue or the issuer s articles of association so provide or provided that the depositors consent to the substitution. 2 A global certificate is a certificated security within the meaning of Article 622 of the Code of Obligations of the same kind as the certificated securities it represents. The global certificate is jointly owned by the owners of the securities it replaces, in proportion to their respective interests. Article 937a, paragraphs 1 and 2, shall apply by analogy to the rights of the joint owners. Article 973.c Uncertificated Securities 1 An issuer may replace fungible certificated securities or global certificates held in custody by the same depository by rights having the same function as the certificated securities (uncertificated securities) provided that the conditions of issue or the issuer s articles of association so provide or provided that the depositors consent to the substitution. 2 The issuer shall enter in a register the quantity and par value of the uncertificated securities issued as well as their owners. This register shall not be public. 3 The uncertificated securities shall be created by entry in the register and shall exist only as booked therein. 4 The transfer of uncertificated securities shall require a written assignment. Uncertificated securities may be pledged in accordance with the rules governing pledges of receivables. 2. Debt Enforcement and Bankruptcy Act 17 Article Over-indebtedness (new paragraph) 17 RS 281.1

15 3 Revocation is further excluded where a secured interest in securities, intermediary-held securities or other financial instruments traded on an organized market has been created by a written contract which provides that: 1. In the event of a change in the value of the collateral or the secured debt, the collateral must be increased; or 2. The restitution of the collateral may be required in exchange for other collateral of the same value. 3. The Banking Act 18 Article 17 Without prejudice to the provisions of the Act on Securities held with an Intermediary of 200_ Civil Code 20 Article 901 bis 3 The pledge of intermediary-held securities is exclusively governed by the Act on Securities held with an Intermediary of 200_ The Mortgage Bond Lending Act 22 Article 7 I. Mortgage Bonds a. Form 1 Mortgage bonds may be issued in the form of certificated securities, global certificates or uncertificated securities. 2 Mortgage bonds shall be issued in registered or bearer form. 3 When issuing registered mortgage bonds, the central mortgage bond institution shall keep a register in which the names and addresses of the owners and usufruct holders are entered. The register shall not be public. 4 Registration shall be based exclusively on a document that establishes the acquisition of title to the mortgage bond or the creation of a usufruct interest. 5 In dealings with the central mortgage bond institution, only the party booked in the register shall be deemed the legitimate titleholder. 18 RS RS. 20 RS RS. 22 RS

16 Article 8 b. Conditions of Issue The Federal Council is authorized to promulgate rules concerning the issue of mortgage bonds and their contents. Article 9 c. Certification of Legal Cover Before issuing mortgage bonds, the responsible bodies shall certify the existence of legal cover.