On 22 August 2008, the European Commission's Legal Certainty Group (LCG) published its second advice which put forward solutions to legal barriers relating to the cross-border holding and settlement of securities. These solutions are expected to lead to an improved and harmonised legal framework for the holding and settlement of securities through intermediaries and for the processing of corporate actions.
The LCG's recommendations primarily present solutions to the so-called ‘Giovannini Barriers’, identified in The Giovannini Reports, published in 2001 and 2003.
The solutions addressed:
- Giovannini Barrier 13 - the absence of an EU-wide framework of laws regarding book-entry securities. The recommendations delivered a set of rules covering many important legal aspects of book entries made to securities accounts, such as the different methods for creating security interest, priorities, or the protection of the integrity of the issue. However, they circumvented the necessity to make fundamental changes to Member States' laws that currently govern securities holding and settlement.
- Giovannini Barrier 3, which deals with the differing rules governing corporate actions' processing. Here the LCG proposed a rule on cross-border interconnectivity between conflicting models of securities holding as well as a rule on the specific duties of intermediaries regarding the information flow between investor and issuer.
- Giovannini Barrier 9, which deals with restrictions on the location of securities. The LCG advocated that issuers should have a free choice in choosing their central securities depository.