AMEDA Leadership Forum Egypt Overview of the requirements for compliance with G30, the Implications for CSDs of Unidroit and the Hague Conventions PRESENTED BY: Anne Njoroge DATE: Monday, 27 April 2009

INTERNATIONAL ORGANISATIONS International activity in the post-trade clearing and settlement arena: Group of Thirty Giovannini Group ISSA Hague Conference on Private International Law UNIDROIT Conventions: Hague and UNIDROIT

Group of Thirty Consultative Group on International, Economic and Monetary Affairs Private non-profit, international body with representatives from public and private sectors Examines international economic and financial issues Recommendations to improve the safety and efficiency of international securities markets

G30 Recommendations: Interoperable global network Eliminate paper and automate communication, data capture, and enrichment. Harmonize messaging standards and communication protocols. Develop and implement reference data standards. Synchronize timing between different clearing and settlement systems and associated payment and foreign-exchange systems. Automate and standardize institutional trade matching. Expand the use of central counterparties. Permit securities lending and borrowing to expedite settlement. Automate and standardize asset servicing processes, including corporate actions, tax relief arrangements, and restrictions on foreign ownership.

G30 Recommendations: Mitigating Risk Ensure the financial integrity of providers of clearing and settlement services. Reinforce the risk management practices of users of clearing and settlement service providers. Ensure final, simultaneous transfer and availability of assets. Ensure effective business continuity and disaster recovery planning. Address the possibility of failure of a systemically important institution. Strengthen assessment of the enforceability of contracts. Advance legal certainty over rights to securities, cash, or collateral. Recognize and support improved valuation and closeout netting arrangements.

G30 Recommendations: Improving Governance Ensure appointment of appropriately experienced and senior board members. Promote fair access to securities clearing and settlement networks. Ensure equitable and effective attention to stakeholders’ interests. Encourage consistent regulation and oversight of securities clearing and settlement service providers.

Giovannini Group Group of financial markets experts Advises European Commission on harmonisation of rules, regulations and practices for a single EU financial market Lack of harmonisation creates barriers to cross-border clearing and settlement

International Securities Services Association ISSA Formed as association of securities administrators from around the world Key objective is to share professional knowledge in the securities industry 89 member institutions from 48 countries Members include infrastructure providers and users

Hague Conference on Private International Law International organisation Purpose: working for progressive unification of rules of private international law AME Member States: Egypt (1961), Israel (1964), Morocco (1993), Jordan (2001) and South Africa (2002) Hague Conventions: multilateral treaties

Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary Convention signed by Switzerland and the United States (2006), and Mauritius (2008) Provides legal certainty and predictability as to the law applicable to securities held through intermediaries Facilitates international flow of capital by reduction of legal risk and associated costs in relation to cross-border securities transactions

Hague Convention Traditional conflict of law approach: law of the place where securities are located Unsatisfactory: requires “look-through” various layers of intermediaries to level of issuer or register Uncertainties in “look-through” approach Place of relevant intermediary approach Express agreement on governing law between account holder and intermediary, subject to qualifying office requirement Fall-back provisions

Hague Convention: Scope Law determined in accordance with Convention is applicable to the following issues: Legal nature and effects of rights resulting from credit of securities Legal nature and effect of disposition of securities Requirements, if any, for perfection of disposition of securities Priority of interests and effects Duties of intermediary with regard to competing interests Realisation of interest in securities Disposition of securities and entitlements to dividends, income, or other distributions

UNIDROIT United Nations International Institute for the Unification of Private Law Inter-governmental organisation - Rome Examines ways of harmonising and co-ordinating private law of States AME Member states: Egypt (1951), Israel (1954), Nigeria (1964), South Africa (1971), Tunisia (1980) and Saudi Arabia (2009)

UNIDROIT Draft Convention on Substantive Rules Regarding Intermediated Securities International legal instrument to improve the legal framework for securities holding, transfer and securities lending and borrowing Provides basic legal framework for modern intermediated securities Limitation and management of systemic risk Supports intergration and competitiveness in financial markets Enhancement of cross-border interconnectivity of systems International treaty Upon ratification, becomes “hard law” overriding domestic law Need for harmonisation of domestic law with Convention Convention allows “carve out” provisions through Declarations Member States may denounce Convention after 12 months notice

UNIDROIT Draft Convention: Scope Transparent and non-transparent systems of uncertificated securities holding through intermediaries Intermediated securities - intermediaries may include banks, brokers, financial institutions and the central depository Applies when transfer, pledge etc, take effect through book-entries Does not apply to: issuer activities corporate law issues supervisory issues

UNIDROIT Draft Convention Potential legal risk in exercising rights through layers of intermediaries Concept of ownership: CSD holding in omnibus accounts or segregated accounts for end-investors UNIDROIT Convention caters for both transparent and non-transparent holding patterns UNIDROIT Convention delegates operational issues to settlement system rules

UNIDROIT Draft Convention: Key Issues Transfer of intermediated securities Rights resulting from credit of securities to a securities account Finality of book entry transfers Irrevocability of instructions Protects good faith acquirer of securities Priority ranking among competing interests Preclusion of upper-tier attachment Insolvency Loss-allocation Collateral (Optional)

UNIDROIT Draft Convention: Impact for CSDs Intermediary Transparent or non-transparent Settlement rules

Hague Convention and UNIDROIT Draft Convention Ensure reduction of legal uncertainty in cross-border transactions Hague Convention determines which law will apply UNIDROIT Convention promotes the harmonisation of substantive domestic law: Chosen domestic law should be clear and reliable Chosen domestic law should be compatible with the law of other jurisdictions

THANK YOU AND QUESTIONS? Anne Njoroge Legal Counsel Strate Ltd