1. Legal Aspects of Finance
Slide Set 4
Markets, Parties and Trading
The Stock Exchange and Other Public Trading in Securities
(National) Regulation: Sources, Overview
Matti Rudanko

2. Act on Book Entry System and Settlement Activity
Part 1: General
Part 4: Specific Provisions
Scope of Application
Supervision
Definitions
Custodian Nominee Registration
Damages Liability
Administrative Penalties etc.
Part 2 (Ch. 2 – 5)
Securities Center and Clearing Community
Licence, Administration and Activities
Clearing Parties
Part 3 ( Ch 6 – 7)
Book Entry System
Book Entries
Book Entry Accounts
Operator Liability Fund
Incorporation of Securities in the System
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3. Clearing and settlement of trades
Needed for the transfer of title to securities and verification of payment
book-entry system: no paper certificate is issued for a book entry
book-entry account of the owner or assignee
Nasdaq OMX handles the clearing of derivatives trading and the business connected with the deposit and registration of ownership
Euroclear Finland handles the clearing of securities trading and the business connected with the deposit and registration of ownership
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4. Euroclear Finland
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5. Most common corporate actions
Private placement (New shares are issued in derogation from shareholders’ pre-emptive rights, for instance due to a corporate acquisition or initial public offering)
Split / Reverse Split
Bonus issue and Share issue against payment
Acquisition of own shares
Redeeming of own shares
Increase in reserve funds
Merger/demerger
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6. Business areas of Euroclear
Euroclear (Finland) consists of three business areas: Clearing & Settlement Services, Account Operator Services and Issuer Services
Clearing & Settlement Services takes care of settlement services for equities and all issuing, depository and settlement services for money market instruments and wholesale market bonds.
Account Operator Services operates central book-entry register and offers book-entry account services to account operators and individual investors.
Issuer Services offers CSD services to security issuers. The main services are shareholder lists, insider register, general meeting services, corporate actions and yield payments.
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7. The European Multilateral Clearing Facility
The European Multilateral Clearing Facility N.V. (EMCF), founded in March 2007, is Europe's largest cash equities clearing house and offers clients a cost-effective way of confidently managing settlement risks.
EMCF offers Central Counterparty Clearing House, or CCP, services to more than 50 financial-service providers in 19 European countries, using ten Multilateral Trading Facilities (MTFs)and exchanges: e.g.NASDAQ OMX Nordics (Denmark, Finland & Sweden)
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8. What does Central Counterparty Clearing mean?
Central counterparty clearing involves the legal transfer of obligations to a central counterparty, which becomes the buyer to the seller and the seller to the buyer.
With the CCP counterparty risk - or the risk that one party to a trade suffers losses because the other party cannot fulfil its obligations - is mitigated.
Central counterparty clearing enables netting of trades, which provides significant cost savings from lower margin requirements, fewer settlements, and simpler operations.
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9. Act on Securities Accounts
Ch.1
General Provisions
Ch 2
Securities Accounts
Account Right
Order of Priority
Ch 3
Safekeeping of Securities
Right of the Custorian to make Entries with Legal Validity towards Third Persons
Insolvency of the Custodian
Ch 4: Specific Provisions
Liability for Damages
Supervision
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10. The Finnish Securities Complaint Board
A self-regulatory body (private sector; only recommendations)
The Securities Complaint Board offers consultative advice concerning the content of securities market legislation and related authority orders, the application of contractual terms, good commercial practices in securities trading and other issues related to securities practices.
The service is free of charge and available to all non-professional investors, who are customers of banks, investment firms or mutual fund companies.
The operations of the Securities Complaint Board abide by the principles of impartiality, transparency, reciprocity, efficiency, legality, freedom and representation defined in the Commission Recommendation (2001/310/EC) for out-of-court and alternative arbitration bodies and methods involved in the resolution of consumer disputes.
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