431 SECURITIES CUSTODIANSHIP AND SECURITIES REGISTRY OPERATIONS
a. The securities custodian must be a bank that is authorized to engage in investment management or trust business. The securities registry must be a bank.
b. It must have complied with the minimum capital accounts required under existing regulations, as follows:
(1) Domestic banks. The minimum capital required under Sec. 121 or the minimum capital required for TBs operating in Metro Manila, whichever is higher.
(2) Branches of foreign banks. The minimum capital required under Sec. 103
c. Its risk-based capital adequacy ratio is not lower than twelve percent (12%) at the time of filing the application;
d. It must have a CAMELS composite rating of at least “4” (as rounded off) in the last regular examination;
e. It must have in place a comprehensive risk management system approved by its board of directors (or equivalent management committee in the case of foreign bank branches) appropriate to its operations characterized by a clear delineation of responsibility for risk management, adequate risk measurement systems, appropriately structured risk limits, effective internal control and complete, timely and efficient risk reporting systems. In this connection, a manual of operations (which includes custody and/or registry operations) and other related documents embodying the risk management system must be submitted to the appropriate supervising and examining department at the time of application for authority and within thirty (30) days from updates therefrom;
f. It must have adequate technological capabilities and the necessary technical expertise to ensure the protection, safety and integrity of client assets, such as:
(1) It can maintain an electronic registry dedicated to recording of accountabilities to its clients; and
(2) It has an updated and comprehensive computer security system covering system, network and telecommunication facilities that will:
(a) limit access only to authorized users;
(b) preserve data integrity; and
(c) provide for audit trail of transactions.
g. It has complied, during the period immediately preceding the date of application, with the following:
(1) ceilings on credit accommodation to DOSRI; and
(2) single borrower’s limit.
h. It has no reserve deficiencies during the eight (8) weeks immediately preceding the date of application;
i. It has set up the prescribed allowances for probable losses, both general and specific, as of date of application;
j. It has not been found engaging in unsafe or unsound manner during the last six (6) months preceding the date of application;
k. It has generally complied with laws, rules and regulations, orders or instructions of the Monetary Board and/or Bangko Sentral Management;
l. It has submitted additional documents/information which may be requested by the appropriate supervision and examination department, such as, but not limited to:
(1) Standard custody/registry agreement and other standard documents;
(2) Organizational structure of the custody/registry business;
(3) Transaction flow; and
(4) For those already in the custody or registry business, a historical background for the past three (3) years;
m. It shall be conducted in a separate unit headed by a qualified person with at least two (2) years experience in custody/ registry operations;
n. It can interface with the clearing and settlement system of any recognized exchange in the country capable of achieving a real time gross settlement of trades; and
o. A securities custodian which provides the value-added service of securities lending involving securities that are sold, offered for sale or distributed within the Philippines must be a duly-licensed lending agent registered with the SEC.
a. Safekeeps the securities of the client;
b. Holds title to the securities in a nominee capacity;
c. Executes purchase, sale and other instructions;
d. Performs at least a monthly reconciliation to ensure that all positions are properly recorded and accounted for;
e. Confirms tax withheld;
f. Represents clients in corporate actions in accordance with the direction provided by the securities owner;
g. Conducts mark-to-market valuation and statement rendition;
h. Does earmarking of encumbrances or liens such as, but not limited to, Deeds of Assignment and court orders;
i. Acts as a collecting and paying agent in respect of dividends, interest earnings or proceeds from the sale/redemption/maturity of securities held under custodianship: Provided, That the custodian shall immediately make known to the securities owner all collections received and payments made with respect to the securities under custody; and
j. in addition to the above basic functions, it may perform the value-added service of securities lending as agent: Provided, That it complies with Item “o” of the pre-qualification requirements under Sec. 431: Provided, further, That the securities lending service shall be covered by a Securities Lending Authorization Agreement (SLAA) which shall be attached to the custody contract.
a. Maintains an electronic registry book;
b. Delivers confirmation of transactions and other documents within agreed trading periods;
c. Issues registry confirmations for transfers of ownership as it occurs;
d. Prepares regular statement of securities balances at such frequency as may be required by the owner on record but not less frequent than every quarter; and
e. Follows appropriate legal documentation to govern its relationship with the Issuer.
a. Administration of securities custodianship accounts of banks. Securities custodianship accounts shall be administered in the Trust Unit of a bank.
b. Accounting and recording for securities. Custodians must employ accounting and safekeeping procedures that fully protect customer securities. It is essential that custodians segregate customer securities from one another and from its proprietary holdings to protect the same from the claims of its general creditors.
c. Documentation. The appropriate documentation for custodianship shall be made and it shall clearly define, among others, the authority, role, responsibilities, fees and provision for succession in the event the custodian can no longer discharge its functions. It shall be accepted in writing by the counterparties.
d. Confirmation of custody. The custodian shall issue a custody confirmation to the purchaser or borrower of securities to evidence receipt or transfer of securities as they occur. It shall contain, as a minimum, the following information on the securities under custody:
(1) Owner of securities;
(3) Securities type;
(4) Identification or serial numbers;
(6) Face value; and
(7) Other information, which may be requested by the parties.
e. Periodic reporting. The custodian shall prepare at least quarterly (or as frequent as the owner of securities will require) securities statements delivered to the registered owner’s address on record. Said statement shall present detailed information such as, but not limited to, inventory of securities, outstanding balances, and market values.
a. where the purchaser is a related entity acting in its own behalf and not as agent or representative of another;
b. where the purchaser is a non-resident with existing global custody agreement governed by foreign laws and conventions wherein the bank is designated as custodian or sub-custodian; and
c. upon approval by the Bangko Sentral, where the purchaser is an insurance company whose custody arrangement is either governed by a global custody agreement where the bank is designated as custodian or sub-custodian or by a direct custody agreement with features at par with the standards set under this Section drawn or prepared by the parent company owning more than fifty percent (50%) of the capital stock of the purchaser and executed by the purchaser itself and its custodian.
a. First offense –
(1) Fine of up to P10,000 a day for the institution for each violation reckoned from the date the violation was committed up to the date it was corrected; and
(2) Reprimand for the directors/officers responsible for the violation.
b. Second offense –
(1) Fine of up to P20,000 a day for the institution for each violation reckoned from the date the violation was committed up to the date it was corrected; and
(2) Suspension for ninety (90) days without pay of directors/officer responsible for the violation.
c. Subsequent offenses –
(1) Fine of up to P30,000 a day for the institution for each violation from the date the violation was committed up to the date it was corrected;
(2) Suspension or revocation of the authority to act as securities custodian and/or registry; and
(3) Suspension for one hundred twenty (120) days without pay of the directors/officers responsible for the violation.