Procedure for admission of securities to collective safe custody – admission deadlines and content of legal opinions (if required)
In addition to Announcement D16029, Clearstream Banking AG (CBF) informs customers that the admission of equities (shares) or debt instruments (bonds) of international issuers may require the presentation of a legal opinion.
CBF points out that requests for the admission of international securities are subject to individual checking.
The following legal points, in particular, need to be clarified in connection with the delivery of international securities into collective safe custody with CBF:
- Is the securities certificate that is to be held in collective safe custody in Germany a financial instrument within the meaning of section 1 paragraph 1 of the German Securities Deposit Act (Depotgesetz, DepotG), which even certifies rights that are fungible with one another vis-à-vis the issuer (‘the rights from the document follow the right to the document’)?
Are there any special legal requirements regarding the characteristics of the securities certificate under the law of the issuer’s country of domicile? - For registered securities – Can the financial instrument be transferred by means of endorsement in the country of domicile of the issuer?
If so, what are the requirements regarding the form of the endorsement and the disposal of the financial instrument? - Does the law of the issuer country permit the issuer to deposit the securities certificate outside the home market of the jurisdiction applicable to the issuer (in particular the law applicable to the rights embodied in the financial instrument (Wertpapierrechtsstatut]); and in this case with CBF in Germany?
Does safe custody outside the home market have a detrimental effect on the investor's position vis-à-vis the issuer, especially in the case of shares?
Can any voting rights be exercised without restrictions? - Are dispositions (for example, a sale, a pledge) that the investor makes through CBF as intermediary, within the latter's custody and settlement system in Germany – and therefore outside the jurisdiction of the issuer’s home country – recognised under the law of the issuer’s home country?
Would German law ultimately take precedence on the application of the law of the home country of the issuer and the conflict-of-laws rules of German law (lex cartae sitae or possibly section 17a of the German Securities Deposit Act)?
CBF asks customers to take into consideration that the examination of legal opinions by CBF may attract longer processing times.
In order to enable observance of scheduled value dates, legal opinions have to be submitted minimum seven business days before the planned value date (VD-7). The processing period is different from the period required for checking all other admission-related documents.
Together with the issuer and/or legal advisor, the issuing agent (issuing bank/lead manager) has to ensure that the above-stated legal requirements are fulfilled.
Should the check by CBF reveal that there is further need for clarification, legal opinions may need to be revised. This could lead to longer processing times for admission applications.
In no case will CBF contact the issuer. This also applies to third-party issues.
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This Announcement is published by Clearstream Banking AG (CBF), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, registered with the Commercial Register of the District Court in Frankfurt am Main, Germany, under number HRB 7500.