CALYON answer to the consultation of the European Commission on legislation on legal certainty of securities holding and dispositions

Transcription

1 Paris, 10 June 2009 CALYON answer to the consultation of the European Commission on legislation on legal certainty of securities holding and dispositions Calyon is a Corporate and Investment Banking. With around 14,000 employees in more than 50 countries, Calyon offers its clients a comprehensive range of products and services in capital markets, brokerage, investment banking, structured finance, corporate banking and international private banking. The Corporate and Investment Bank is structured around four major divisions: Corporate and Investment Banking, Equity Brokerage and Derivatives, Fixed Income Markets, Structured Finance. In particular, the Equity Brokerage and Derivatives division covers equity brokerage in Europe, Asia and the United States, as well as trading, equity derivatives and funds. Calyon s equity brokerage activities are world renowned and organised around two subsidiaries, each with leading positions: Cheuvreux, which covers Europe and the Middle East, and 60 markets for execution services, and CLSA, which is active throughout Asia including Japan. Their coverage is rounded out by Calyon Securities (USA) Inc. and Newedge, a subsidiary jointly owned by Calyon and Société Générale, which is ranked in the top five for execution and clearing on listed derivatives products. Headquarter: Calyon 9, quai du Président Paul Doumer Paris La Défense Cedex, France. Tel : Company with limited liability with a capital of EUR Companies Register SIREN Contact : Olivier.Coupard@calyon.com 1

2 LEGISLATION ON LEGAL CERTAINTY OF SECURITIES HOLDING AND DISPOSITIONS Consultation of the Services of the Directorate-General Internal Market and Services Calyon welcomes the opportunity to respond to the European Commission consultation on the future legislation on legal certainty of securities holding and disposition. This initiative clearly shows the determination of EU decision-makers to urgently address the shortcomings of the European supervisory framework that have been underlined by the financial crisis. Prior to outlining our detailed comments, we would like to make the following preliminary comments. Preliminary comments: Calyon, where demand is high for a European legislation on holding and disposition of securities, welcomes this consultation with great pleasure. A European legislation on legal certainty of securities holding and dispositions is of paramount importance for all the entities its group. The past months have revealed the lack of regulation of securities holding. Especially, certain systems lack a clear distinction between intermediaries and the final investor who from our point of view must not have the same rights on the securities since they do not have the same legal position. Different legal positions must lead to different rights on the securities and unfortunately the terms of this consultation may create confusion between the various participants in the chain of intermediaries and the final investor, as well as between the rights on the securities and the right flowing from the securities. We thus would like to underline the great difficulty we had in responding to this consultation because of the uncertainty of the signification of the terms used which could lead to opposed meanings. These confusions are damageable to the quality of the future European legislation and from our point of view this consultation should be clearer. Under this consideration, it seems important to point out a contradiction in the consultation paper. The presentation underlines ( 1.1) that at the source of these (legal) uncertainties were the differences in the legal concepts that applied to securities booked to security accounts and then declares in a contradictory way ( 2.2) that the exact legal-conceptual nature (property, shared property, trust, specifically designed right) of the acquired position is only of secondary importance to the acquirer which is wrong. Legal certainty arises only if the investor is sure of the extent of the right he has acquired on the securities. On this ground the future European legislation should be far more ambitious than the UNIDROIT project whose functional approach, necessary because of the presence of the United States, has limited the consistence of the reflexion even in some groups like the LCG whose work has been done in consideration with the UNIDROIT project and its necessary functional approach. The functional approach which has been chosen during the UNIDROIT discussion seems counter productive and may not correspond to the new issue (European legislation) and context (financial crisis of October 2008, Lehman bankruptcy dysfunctions, Madoff scandal) in which this new consultation arises. Necessary at the international level as the United States have refused the dematerialisation of their securities and deconstructed the notion of property right about securities with the invention recent and open to criticism of the notion of security entitlement, this functional approach is not necessary in the European Union. 2

3 Indeed, far from the way taken by the United States in 1984 (U.C.C., Art. 8), most of the European countries have always maintained the existence of a property right on securities and know the dematerialisation (in Europe, for ex. a shareholder has the ownership of the shares and can dispose of its like any other goods present in its heritage). This common thinking in Europe should encourage the conceptual approach of securities holding and dispositions which is the best way towards legal certainty instead of a functional one. Besides this common spirit of European laws on securities holding and disposition, a functional approach is not desirable in a European discussion on book-entry securities for at least two reasons. Firstly because of the confusions which result from this approach. Thus, still in the presentation of the consultation, it is written ( 1.2): Starting from a functional point of view, the legal position of the acquirer should be shaped along the practical-economical purposes of an acquisition of securities or interests in securities. Notably, account holders need to know (a) that the securities can be disposed of or used to provide a security interest; (b) whether they can enjoy the rights flowing from securities (dividends, voting rights), and, (c) whether and to what extent they can change the holding situation, if necessary. This presentation assumes a disturbing confusion between the right on the security and the rights flowing from the security. The rights flowing from the securities should be outside the scope of future European legislation on securities. Of course, we understand that it must always be possible for the end investor to exercise the rights flowing from securities and which are the essence of securities. But, despites this functional approach, it can t be ignored that these rights are from different nature. Certainly, in a functional approach these rights are results to be reached (and then equivalent), but it can t be denied that these different rights (for example the right to dispose of the security and the right flowing from the securities) result from different relations which are of different natures and which therefore can t be assimilated. In international private law for example, the right to dispose of the security obeys to the lex rei sitae whereas the right flowing from the security are governed by the lex societatis. Even if the rights flowing from the securities which depend on the lex societatis are considered as to be inside the scope of the future directive which will then interfere with each national corporate law, the difference between the right on the securities and the right flowing from the securities must be at all stages clearly distinguished. Secondly, one of the main works of the European Commission is presently to define the main abstract legal terms (contract, damages, consumer, etc ) to benefit from a common terminology (see in particular the second drawers of the Draft Common Frame of Reference). This is the consecration at the higher level of a conceptual approach lying on definitions, classifications in categories to which corresponds a set of particular rules. From this point of view, the consultation seems a little bit outmoded. No definition of the different terms is given although they are often ambiguous in a quite complicated legal area. For ex., what is an account holder, is there a difference between an account holder who is also an account provider - i. e. an intermediary in the chain of intermediaries - and the account holder who is the investor? The question is not only of terminology. Protecting the assets of the final investor should be one of the core-principle of the future European legislation. Yet, in this consultation the final investor is treated as a mere account holder (comp. the account holder of this consultation with the entitlement holder in the UCC, Art. 8), although in practice he should be granted with specific rights and protection. Other account holders in the chain, who are indeed mere intermediaries, should be prevented from acquiring the account holder rights as such an acquisition of rights by intermediaries (like in the UCC, Art. 8) leads to confusion and would weaken most Member States national regimes allowing other Madoff scandals. 3

4 A clear difference has thus to be made in the future European legislation between the account holder who is the final investor and an account holder who is also an account provider and then only an intermediary. They simply do not have the same legal position and cannot benefit from the same rights on the security. These considerations lead to analyse certain questions of this consultation which formulation seems oriented with a quite unsatisfactory regard. It must be underlined that the draft UNIDROIT securities convention cannot be considered as a basis for this European consultation as it was very inspired by the remote American system (see for ex. answer to question 5) which is unnecessarily complex (no real dematerialisation implying a very complicated creation of a security entitlement at each levels of the chains of intermediaries), unsecured (possibility for all the account holders of the chains of intermediaries to dispose of the securities) and unsatisfactory (possibility to have 120% of voting person in the general meetings). Besides, considering the actual financial crisis, some questions seem simply outdated especially considering Lehman Brothers liquidation and Madoff scandal (see for ex. questions 20, 21, 22, ). These preliminary points seen, this consultation is a first step forward as the harmonisation of the European legislation on legal certainty of securities holding and dispositions is of paramount importance but it will be necessary to make strong reserves, in particular when the consultation uses ambiguous terms or when the questions directly refer to American concepts with no connexion to any European legal systems. 4

5 QUESTIONS OF THE EC CONSULTATION CALYON GROUP ANSWERS 1. LEGAL FRAMEWORK OF HOLDING AND DISPOSITION OF BOOK-ENTRY SECURITIES 1.1. General need to harmonise laws in the relevant area Question 1: The far greatest part of securities are held and administered through securities accounts maintained by an account provider (e.g., a bank, a broker, a custodian or similar). What is your estimate regarding the percentage of securities which are not held through a securities account? No securities are not held through a securities account. France has assumed a complete dematerialisation of its securities since 1984 (law dated on 1981, decree dated on 1983) The intervention of an account provider is thus of paramount importance and for security reason their intervention is largely regulated. Under French law, the account provider could be either the issuer itself, or an intermediary. Question 2: Do you assume that the application of the legal framework for acquisition or disposition of book-entry securities, including the creation of collateral interest, is more complex as soon as there are crossjurisdictional elements to be taken into account? [Yes, considerably more complex/yes, slightly more complex/no/i don't know. Please specify and make a distinction between operations occurring inside and outside a securities settlement system, if possible.] Yes, slightly more complex. The question whether an account holder is a resident or non-resident vis-à-vis the account provider is not an element of complexity. The Collateral Directive has largely contributed to remove a major element of complexity in this domain. Operations that are settled through a securities settlement system present no complexity and this is by far the most frequent way of settling transactions (99% of the settlements flow through an SSS). 5

6 1.2. The legal nature of book-entry securities / minimum harmonisation Question 3: Do you think that harmonisation of the law of No, minimum harmonisation is not holding and disposition of book-entry sufficient but it could be a first step. securities should be done by way of minimum harmonisation, i.e. that in general, Member States' law shall continue to define the general legal characterisation of bookentry Note that the formulation of the title of the 1.2. reveals the confusion between the book-entry security and the right on the securities, whereas certain book-entry security which is present in all characteristics of book-entry securities are the consultation. harmonised? The book-entries securities are financial goods and their nature are not the point of the question. This point 1.2 deals with the law of holding and disposition of book-entry securities which are the patrimonial rights on the book-entry securities.. 6

7 Question 4: Do you think that book-entry securities should confer upon the account holder the following minimum rights [Yes/No/I don't know, please specify and indicate whether additional elements should be harmonised]: (a) the right to exercise and receive the rights attached to the securities, as far as the account holder itself is identified by the issuer law as the person entitled to these rights; (b) the right to instruct the account provider to dispose of the securities; (c) the right to instruct the account provider to arrange for holding the securities with another account provider or otherwise than with an account provider, as far as the applicable law allows holding otherwise than with an account provider. No, the following minimum rights cannot be conferred to all the account holders since the account holder is not defined. For ex. (b) can only be provide to the investor i. e. the final account holder but not to the account holders who are also account providers (intermediaries in the chain) and who must benefit only from the (c). Is this question also, confusion is clearly made between the rights flowing from the securities and the right on the securities (see preliminary comments). In a book-entry security there are two things: the book-entry (registration) which allows the account holder to dispose of the securities and the security (for ex. shares) which allows the account holder (for ex. shareholders) to exercise his rights (for ex. dividend, vote). Thus the distinction should be made between the real account holder (investor) and the account holder who is also an account provider (intermediary). Their rights on the goods cannot be the same. It should be noted that if these rights were enounced as obligations lying on the account provider there will be no difficulties. From a general point of view, it must be clearly determined what is the field of this future legislation (see preliminary comments): is it the right on the book-entry securities (lex rei sitae), is it the right flowing from the book entry securities (lex societatis) which as part of the acquis is already covered by the shareholders rights directive and which remains outside of the proposed directive scope. If it is booth which seems relevant, then the two aspects must be clearly distinguished as they concern two different types of legal relations. 7

8 1.3. Acquisition and disposition of book-entry securities Question 5: Do you think that a fix set of methods for acquisition and disposition of book-entry securities (crediting an account; debiting an account; earmarking book-entry securities in an account, or earmarking a securities account; removing of such earmarking; concluding a control agreement; concluding an agreement with and in favour of an account provider) should be available to market participants throughout all EU jurisdictions? Question 6: In the event of not all six methods listed in Question 5 becoming available to market participants in all Member States: do you think that the law of any Member State should recognise, in particular in an insolvency proceeding, acquisitions and dispositions effected by one of these methods under the law of another Member State, even if the law of the first Member State does not provide for that method? No, we do not think that all these methods need to be made available to account providers all over Europe. The non book entry methods are non desirable because of the legal uncertainty they create against third parties and fraud it allows. What is the definition of the notion of market participant (difference with account holder / account provider?) Note that concluding an agreement with and in favour of an account provider seems only necessary in the United States because of the rights of the account provider which is also an account holder and thus, like the final investor, has a security entitlement with respect to the same financial asset. Yes, as an application of the general principle of mutual confidence but it is of paramount importance to understand that non book entry methods are non desirable (see supra question 5) [Yes/No/I don't know; please specify Question 7: Do you think that future legislation should leave to Member States the possibility of making the effectiveness of an acquisition or disposition subject to a condition contractually agreed upon between account holder and account provider, in particular a condition that a corresponding acquisition or disposition occurs? No. In particular, future European legislation should prohibit the acquisitions and dispositions if the corresponding dispositions and acquisitions do not occur (no debit without credit principle). [Yes/No/ I don't know; please specify] 8

9 Question 8: Do you think that there should be a short, harmonised list of conditions giving rise to a reversal of an acquisition or disposition, notably (a) the consent of the account holder; (b) the credit or debit which was made in error; (c) the debit or earmarking or removal of an earmarking which was not authorised. No, this should be left to the contract between the account holder and the account provider, and be subject to other provisions of future European legislation, such as the prohibition for the account provider to use securities and the obligations to take all necessary care in the custody of securities registered into account. [Yes/No/I don't know, please specify, indicating which one to add/delete, if any] Question 9: Do you think that account holders in whose favour a credit has been made should be protected against the reversal unless they knew or ought to have known that the credit should not have been made? Question 10: Do you think that interests in book-entry securities, notably security interests, which are "visible" in the account, should have priority over book-entry securities which are not "visible" in the account? Yes, with no reference nor to a significant probability clause neither an exclusion of an acquisition made by way of gift or otherwise gratuitously which diminished the protection of the bona fides acquirer without any relevant reason (the reference to ought to have known is source of legal uncertainty for the account holder). Note that this protection exists under French law (cf art. L COMOFI) Yes, even if the not visible security interests are valid between the parties and against third parties, the security interests which are visible should have priority over book-entry securities which are not visible in the account. From a general point of view : book-entry visible rights should always have priority over non visible ones. 9

10 1.4. Integrity of the issue and protection in the event of insolvency of the account provider Question 11: Do you think that there should be a legal obligation for account providers to maintain, for securities of the same description, a number of securities or book-entry securities that corresponds to the aggregate number of book-entry securities of that description credited to the accounts of the account holder's clients plus those securities held for its own account, if any? Yes The chains of account providers have also to collectively organise the holding of the exact same number of securities (and not only a number equal or inferior) of the same denomination compared to the one which were issued. Application of double-sided accountancy principles could ensure the above principle. Question 12: Do you think that, in case of insolvency of the account provider, securities kept by it for its own account shall be attributed to its account holders, as far as the number of securities kept by the account provider for its account holders is insufficient? Yes, but it is a remedy for exceptional situations involving a bankruptcy case provided that the segregation and non use principles remain in force in all other situations. Question 13: Do you think that a remaining shortage should be shared amongst account holders of that account provider, in the case of its insolvency? Yes, but it is a remedy for exceptional situations involving a bankruptcy case. 10

11 Question 14: Have you encountered difficulties in the application of the legal framework regarding holding and disposition of book-entry securities that could be fully or partially attributed to an unsatisfactory conflict-oflaws regime? [Yes/No/I don't know; if yes, please specify the difficulties] 1.5. Identification of the applicable law No, It is written in the consultation that the conflict-of-laws rules (Inside the EU) do not conform to each other. On the contrary, to our knowledge, all conflict of law rules in the EU involving all aspects linked with the holding and disposition of securities (including all aspects not covered by the existing EU harmonisation) are convergent and all of them point toward the lex rei sitae as the common principle enounced in the established community rules (Art. 9 «conflict of laws rule», Dir. 2002/47/CE dated 6 june 2002 said Financial Collateral Directive ; see also less precise criterium in : Art. 24, Dir.2001/24/CE dated 4 april 2001 on Winding-up of Credit institution and Art. 9 2, Dir. 98/26/CE dated 19 may 1998 said Settlement finality directive) Question 15: Do you think that future legislation on the legal framework of book-entry securities holding and disposition should harmonise issues of substantive law as well as the question of which law is applicable to holding and disposition of book-entry securities, including the creation of security interests? Question 15bis: If yes: do you think that a uniform conflict-oflaws rule should govern the issues within the scope of the Settlement Finality Directive, the Directive on Winding-Up of Credit Institutions and the Financial Collateral Directive plus the aspects which are to-date not included in the scope of the three directives? The registered securities should be concerned by this conflict-of-laws rule (cf. Luxalpha case) Yes, it potentially could bring some benefits, but only under the condition that the provided harmonisation does not depart from the current efficient principle of the objective localisation of the account. The account must be understood as the relevant account which is the account opened by the investor. This solution avoids all complication especially with the consumer national laws. Note that we clearly speak of the law applying to the right on the securities and not of the right flowing from the securities which are submitted to the lex societatis (see question 4) Yes, as long as we know it is already quite the same rule even if the conflict of laws rule enounced in the Financial Collateral Directive is the most precise one. The uniform conflict of laws rule should then comply with the rule enounced in the Financial Collateral Directive (see also supra question 15). Note that two earlier consultations dating back to 2006 on the operation of both the 11

12 12 Finality and of the Collateral directives made clear that no difficulty has been encountered, including with respect to the interpretation of the conflict-of-law rule.

13 1.6. Cost related to aspects addressed in sections Question 16: Do you think that holding and disposition of book-entry securities is more costly in cases where the situation involves a crossjurisdictional element? Yes, slightly more costs, but the main problem is not the cost, the main problem is the ability, for the investor, to exercise his rights in a cross border environment. About this point, it does not seem more difficult. Question 16bis: If yes, could you give your best estimate of the additional cost and specify what types of cost arise? N/A 2. PROCESSING OF RIGHTS FLOWING FROM SECURITIES 2.1. Need to harmonise the relevant laws Question 17: Do you think that investors face difficulties in exercising rights flowing from securities as soon as they hold through a cross-border holding chain? [Yes, considerable difficulties/yes, slightly more difficulties than in a domestic context/no/i don't know, if yes, please specify the difficulties] Slightly more difficulties. However provision of services under global custody agreement leads to diminish difficulties. The main obstacle to the exercise of rights is the cases where and when the investor s securities holding national law transform the intermediary into a legal shareholder, potentially depriving the investor of his rights. From our point of view (see question 3 and 4), there must be a clear distinction between the rights flowing from securities and the rights on the securities. About the rights flowing from securities, see also the shareholders rights directive. 13

14 Question 18: Do you think that the law of Member States should bind account providers to facilitate the exercise of rights flowing from the securities (e.g. by providing the investor, upon demand, with a certificate confirming his holdings; or, by making the investor the account provider s representative with respect to the exercise of the relevant rights {proxy}), where the exercise of rights would be impossible or cumbersome without the assistance of the account provider? 2.2. Facilitation of the exercise Yes, account providers must facilitate the exercise of rights attached to the securities by the final investor. No distinction should be introduced according to whether the exercise of rights otherwise than through the account provider would be impossible or cumbersome. As a principle, when a security is registered into accounts provided by intermediaries, the exercise of rights through the chain of intermediaries is in most cases done most efficiently through the chain. Making the investor the account provider s representative seems remedy to the situation where intermediaries are transformed by virtue of the local law into legal shareholders. Question 19: Do you know other cases where assistance of the account provider is a prerequisite for the exercise of the right by the investor? Yes, the information related to general meetings (cf. question 18) and taxes assistance. [Yes/No/I don't know; if yes, please specify] 2.3. Exercise of rights by an account provider on behalf of the investor Question 20: Do you think that Member States' law should make possible the exercise of rights flowing from securities by an account provider on behalf of the investor where the exercise of the rights by the investor himself is impossible? No, the future European legislation should always make possible the exercise of its rights by the investor. Note that a clear distinction between the rights flowing from securities and the rights on the securities. (see question 4) In corporate actions only, if it is to protect the right of the final investor, contracts must allow the account provider for example to sell the subscription right, but it must not be an investment decision even by default or by automatic choice. 14

15 Question 20bis: In the affirmative case, do you think that this possibility should be subject: See above (a) to feasibility on the side of the account provider. [Yes/No/ I don't know, please specify, in particular, the exact scope of such feasibility exemption], and/or (b) to contractually agreed levels of service between the account holder and the account provider? [Yes/No,/ I don't know, please specify]. Question 21: Do you think that Member States' law should make possible the exercise of rights flowing from securities by an account provider on behalf of the investor, in a scenario where the investor does not want to exercise the rights himself? No, the default exercise of rights must not to be promoted Note that a clear distinction between the rights flowing from securities and the rights on the securities. (see question 4) 15

16 Question 21bis: In the affirmative case, do you think that this possibility should be subject: N/A (a) to feasibility on the side of the account provider [Yes/No/ I don't know, please specify, in particular the exact scope of such feasibility exemption], and/or (b) to contractually agreed levels of service between the account holder and the account provider?. Question 22: Do you think that an account provider should be bound to exercise, on behalf of the investor, the following rights flowing from securities: (a) Rights entailing a change of the relevant security itself (e.g. conversions, reorganisation) ; (b) Collection of dividends or other payments and subscription rights ; (c) Acceptance or refusal of takeover bids and other purchase offers? ; (d) Other rights [please specify which and why] No, the account provider should not be legally bound to exercise rights on behalf of the investor. Note that a clear distinction between the rights flowing from securities and the rights on the securities. (see question 4) Account providers are under a legal obligation to safeguard the investor's rights on the securities; but in no case can they make investment decisions. Note that the term "exercise of rights" is especially not appropriate in the context of question 22 and should be replaced by "execute instructions". (b) is not a right, collection of dividend is a receipt of cash payment 16

17 2.4. Passing up and down of the necessary information Question 23: Do you think that account providers should be bound to pass on information with respect to book-entry securities which is required in order to exercise a right enshrined in the securities which exists against the issuer? ; Question 24: Do you think that this obligation should be restricted to information Yes, it must be an obligation of the account provider as long as these information are related to the life of the securities and not the life of the issuer. See also Shareholders rights directive. (a) which is received "through the holding chain", (i.e. directly either from the issuer or an account provider which maintains an account for the account provider in question, or from the investor or another account provider for which the account provider in question maintains an account.); (b) which is directed to all investors in securities of that description? Question 25: Would you advise other/additional restrictions to this duty? (a) Yes (b) No In all cases, this information could only be owed to the account provider s clients. N/A [Please specify] 17

18 2.5. Cost related to aspects addressed in sections Question 26: Do you think that the processing of rights Slightly more costly flowing from securities is more costly in case where the situation involves a crossjurisdictional element? [Yes/No/I don't know] Question 26bis: If yes, could you give your best estimate of the additional cost and specify what types of cost arise? N/A 3. FREE CHOICE REGARDING INITIAL ENTRY INTO A HOLDING AND SETTLEMENT STRUCTURE, IN PARTICULAR FREE CHOICE OF CSD, BY THE ISSUER Question 27: Do you think that an issuer incorporated under the law of an EU Member State should be allowed to arrange for its securities to be initially entered into holding and settlement structures (in particular those maintained by a central securities depository) in, or governed by the law of, another EU Member State? No, unless strong prerequisites are fulfilled ensuring that the integrity of the issue being ascertained. In particular, the split of the same issue between several CSDs should not be allowed. In addition the split of an issuance between more then 1 CSD supposes the intervention of a "common depository" which ensures the integrity of the issuance. Therefore, the split of an issuance among several CSD would be more expensive. Question 28: Do you think that holding and settlement structures for securities, in particular those maintained by a Central Securities Depository, which are governed by the law of an EU Member State, should be open for securities constituted under the law of another EU Member State? See answer for question

19 Question 29: Are there, in your view, issues stemming from other branches of law, such as corporate law, fiscal law, etc., or regulatory/supervisory concerns that could advise against the establishment of free choice by an issuer, as set out above. See answer for question 27. [Yes/No/I don't know; if yes, please specify the issues] Question 30: Do you at present incur additional cost because either or both of the above possibilities of choice do not exist? [Yes/No/I don't know/not applicable] No, on the contrary, additional costs would occur through the added complexity and costs of the fragmentation of the introduction into the holding system (while, by principle, CSDs are and and should remain central depositories) and the induced fragmentation of the settlement liquidity. Especially, if the counter-intuitive practice of splitting the issue between several CSDs was authorised, the cost (induced by the reconciliation process or the creation of a common depositary) would be multiplied. Question 30bis: If yes, could you give your best estimate of the additional cost and specify what types of cost arise? N/A 4. DUTIES OF ACCOUNT PROVIDERS Question 31: Do you think that all providers of securities accounts established in the EU should be subject to authorisation and supervision in relation to their services of maintaining securities accounts? Yes, regulation and supervision are mandatory in these fields Question 31bis: If no, which account providers should not be subject to authorisation and supervision by competent authorities? N/A Please designate the type of account provider and specify why.] 19

20 Question 32: Do you think that the service of safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management (which is a so-called ancillary service under MiFID) should be made an investment service in the sense of MiFID (i.e. inserted in Section A of Annex I of the MiFID and be deleted from Section B)? Yes, It would allow legal certainty on the financial markets. It would create a legal common frame for all the European market participants harmonizing their status, their official approval and their control (see for ex. AMF regulation on this point) Question 32bis: If yes, do you see any specific difficulties in including certain types of account provider in the full or even a limited scope of MiFID? [Yes/No/I don't know; if yes, please specify the difficulties] OTHER COMMENTS A definition of the different terms used in this consultation has to be done quickly as most of the questions are not precise. 20