The EU Commission has launched a second public consultation for a planned Securities Law Directive (the SLD). The proposed Directive seeks to address legal barriers to the safe and efficient treatment of securities (such as stocks, bonds, options, futures etc) 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. It is intended that 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 in respect of those securities.

The SLD will cover all markets and all securities across the EU and will affect a number of industry participants who fell outside the scope of other regulation such as MiFID. This will impact on the way that securities are held and traded in the EU, so as to enhance protection for investors by clarifying the legal status of securities at all stages of the financial transaction.