The European Commission is due to launch a second public consultation to feed into a planned Securities Law Directive (the “SLD”). The Directive seeks to address legal barriers to the safe and efficient treatment of securities post-trade, which have arisen as a result of electronic book-keeping and the ways in which securities are held through a chain of account providers. Greater legal certainty will be provided by harmonising EU law with respect to securities that are electronically recorded and to address conflicts of law regarding ownership. In addition to defining how securities can be bought, lent or sold, the SLD will:
- Require account providers to maintain sufficient securities against assets
- Help clarify investor protection in the event of an account provider becoming insolvent
- Help facilitate investor rights pertaining to those securities
The SLD will cover all markets and all securities across the EU and will affect a number of industry participants that previously fell outside the scope of regulation such as MiFID. It will have a considerable impact on the way that securities are held and traded in the EU, enhancing protection for investors by clarifying the legal status of securities at all stages of the financial transaction.