The Central Securities Depositories Regulations 2017

Made: 6th November 2017

Laid before Parliament: 7th November 2017

Coming into force: 28th November 2017

The Treasury are designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to financial services.

The Treasury make the following Regulations in exercise of the powers conferred by section 2(2) of the European Communities Act 1972 and by sections 286 and 428(3) of the Financial Services and Markets Act 2000 .

PART 1 — General

Citation and commencement

1

These Regulations may be cited as the Central Securities Depositories Regulations 2017 and come into force on 28th November 2017.

PART 2 — Amendments to the Financial Services and Markets Act 2000

Amendments to the Financial Services and Markets Act 2000

2

• (1) The Financial Services and Markets Act 2000 is amended as follows.

• (2) In section 3A (meaning of “regulator”), in subsection (3)(b) for “recognised investment exchanges and clearing houses” substitute “ recognised investment exchanges, clearing houses and CSDs ”.

• (3) In section 55G (giving permission: special cases), in subsection (3)(a) omit “any of subsections (2) to (3C) of”.

• (4) In section 128 (suspension of investigations)—

• (a) in subsection (1) for “or recognised clearing house” substitute “ , recognised clearing house or recognised CSD ”;

• (b) in subsections (1)(a) and (b) and (2)(a) for “or clearing house” substitute “ , clearing house or central securities depository ”.

• (5) In section 133 (proceedings before Tribunal: general provision)—

• (a) after subsection (1) insert—

(1A) For the purposes of this section, in the case of a reference to the Tribunal under section 290(4A) (which relates to an application by a central securities depository under section 288A), the failure by the Bank of England to make a decision is treated as a decision to refuse the application (and accordingly is treated as falling within subsection (1)(b)).

• (b) in subsection (7A)(m), after “312E” insert “ or 312FA ” and after “312F” insert “ or 312FA ”.

• (6) In section 192B (meaning of “qualifying parent undertaking”), in subsection (3) for “or a recognised clearing house” substitute “ , a recognised clearing house or a recognised CSD ”.

• (7) In section 192F (consultation between regulators), in subsection (3) after “recognised clearing house” insert “ or a recognised CSD ”.

• (8) For the heading of Part 18 substitute “ Recognised investment exchanges, clearing houses and CSDs ”.

• (9) In section 285 (exemption for recognised investment exchanges and clearing houses)—

• (a) for the heading substitute “ Exemption for recognised bodies etc. ”;

• (b) in subsection (1)—

• (i) omit “and” after paragraph (c);

• (ii) after paragraph (d) insert—

(e) “recognised CSD” means a central securities depository in relation to which a recognition order is in force; (f) “EEA CSD” means a person established in an EEA State other than the United Kingdom who has been authorised by the competent authority of that State as a central securities depository pursuant to Article 16 of the CSD regulation ; and (g) “third country CSD” means a central securities depository established in a State which is not an EEA State which has been recognised by ESMA pursuant to Article 25 of the CSD regulation.

• (c) after subsection (3C) insert—

(3D) A recognised CSD is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with— (a) the core services listed in Section A of the Annex to the CSD regulation which the central securities depository is authorised to provide pursuant to Article 16 or 19(1)(a) or (c) of that regulation, or (b) any non-banking-type ancillary services listed in or permitted under Section B of that Annex which the central securities depository is authorised to provide, including services notified under Article 19 of the CSD regulation. (3E) An EEA CSD is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services and activities covered by its authorisation granted pursuant to Article 16 of the CSD regulation (including additional services authorised or notified under Article 19 of that regulation). (3F) But where Article 23(2) of the CSD regulation applies to an EEA CSD, the EEA CSD is exempt from the general prohibition as mentioned in subsection (3E) only if Article 23(6) of that regulation is complied with. (3G) A third country CSD is exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, the services and activities covered by its recognition by ESMA pursuant to Article 25 of the CSD regulation. (3H) But a recognised CSD, an EEA CSD or a third country CSD is not exempt from the general prohibition as respects any regulated activity which is carried on for the purposes of, or in connection with, any banking-type ancillary service listed in or permitted under Section C of the Annex to the CSD regulation.

• (10) In section 285A (powers exercisable in relation to recognised investment exchanges and clearing houses)—

• (a) for the heading substitute “ Powers exercisable in relation to recognised bodies ”;

• (b) in subsection (2), after “recognised clearing houses” insert “ , recognised CSDs and EEA CSDs ”;

• (c) in subsection (3)—

• (i) in paragraph (a) for “investment exchanges and clearing houses” substitute “ bodies ”;

• (ii) in paragraph (c) after “recognised clearing houses” insert “ and recognised CSDs ”.

• (11) In section 286 (qualification for recognition)—

• (a) in subsection (1)(a) for “or clearing house” substitute “ , clearing house or central securities depository ”;

• (b) in subsection (2) for “or clearing house” substitute “ , clearing house or central securities depository ”;

• (c) in subsection (3) for “or clearing house”, in both places, substitute “ , clearing house or central securities depository ”.

• (12) In section 288 (application by a clearing house), before subsection (1) insert—

(A1) This section applies only in relation to an application by a clearing house.

• (13) After section 288 insert—

(288A) Where a legal person which is established in the United Kingdom intends— (a) to operate a securities settlement system referred to in point (3) of Section A of the Annex to the CSD regulation, and (b) to provide at least one other core service listed in Section A of that Annex, it may apply to the Bank of England in accordance with Article 17 of the CSD regulation and any directly applicable EU regulation made under that Article for an order granting authorisation for the purposes of Article 16 of that regulation and declaring it to be a recognised CSD for the purposes of this Act.

• (14) In section 289 (applications: supplementary), after subsection (4) insert—

(5) In relation to an application under section 288A, this section applies only in relation to information which the Bank of England may require in connection with recognition requirements which do not derive from the CSD regulation or any directly applicable EU regulation made under the CSD regulation.

• (15) In section 290 (recognition orders)—

• (a) in subsection (1)—

• (i) omit “or” at the end of paragraph (b);

• (ii) after paragraph (c) insert—

; or (d) where the application is made under section 288A, make a recognition order (a “CSD recognition order”) granting authorisation for the purposes of Article 16 of the CSD regulation and declaring the applicant to be a recognised CSD.

• (b) after subsection (1D) insert—

(1E) A CSD recognition order must specify— (a) the core services listed in Section A of the Annex to the CSD regulation which the applicant is authorised to provide pursuant to Article 16 or 19(1)(a) or (c) of that regulation, and (b) any non-banking-type ancillary services listed in or permitted under Section B of that Annex which the applicant is authorised to provide, including services notified under Article 19 of the CSD regulation. (1F) A CSD recognition order must also record the terms of any of the following authorisations granted to the CSD under the CSD regulation or notifications made by the CSD under that regulation— (a) an authorisation under Article 19(1) of the CSD regulation to outsource a core service under Article 30 of that regulation, (b) an authorisation under Article 19(1)(d) of the CSD regulation (settlement of cash leg of securities settlement system in the books of another settlement agent), (c) an authorisation under Article 19(1)(e) of the CSD regulation (setting up interoperable link), (d) a notification under Article 19(5) of the CSD regulation (other CSD links), (e) an authorisation under Article 54 or 56 of the CSD regulation to provide (in accordance with Article 54(2)(a) or (b)) any banking-type ancillary service listed in or permitted under Section C of the Annex to that regulation, and (f) an authorisation to provide investment services and activities in addition to the services explicitly listed in Sections A and B of the Annex to the CSD regulation.

• (c) after subsection (4) insert—

(4A) If the Bank of England has not made a decision in relation to an application under section 288A within six months of that application being complete, the applicant may refer the matter to the Tribunal. (4B) For the purposes of subsection (4A), an application is “complete” when the Bank of England informs the applicant that it is complete pursuant to Article 17(3) of the CSD regulation.

• (d) after subsection (5) insert—

(5A) Section 298 has effect in relation to a decision to refuse an application under section 288A— (a) as it has effect in relation to a decision to make a revocation order under section 297(1B); and (b) as if references to a recognised body were references to the applicant.

• (16) After section 290ZA (variation of central counterparty recognition order) insert—

(290ZB) (1) Where the Bank of England— (a) grants an authorisation in accordance with Article 19(1), 54 or 56 of the CSD regulation, (b) receives a notification under Article 19 of that regulation, or (c) decides to withdraw authorisation for a service, activity or financial instrument in accordance with Article 20(4) or 57(4) of that regulation, the Bank of England must vary the CSD recognition order accordingly. (2) Where an authorisation to provide investment services and activities in addition to the services explicitly listed in Sections A and B of the Annex to the CSD regulation is granted, varied or withdrawn, the Bank of England must vary the CSD recognition order accordingly. (3) The Bank of England may at any time vary a CSD recognition order for the purpose of correcting an error in, or omission from, the order.

• (17) In section 290A (refusal of recognition on ground of excessive regulatory provision), in subsection (6) for “or a recognised central counterparty” substitute “ , a recognised central counterparty or a recognised CSD ”.

• (18) In section 293 (notification requirements)—

• (a) in subsection (3), after “this Act” insert “ or under Directive 2016/1148/EU of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security network and information systems across the Union ”;

• (b) after subsection (5) insert—

(5A) In relation to a recognised CSD, in subsection (5), “guidance” means guidance issued, or any recommendation made, in writing or other legible form and intended to have continuing effect, by the recognised CSD to— (a) all or any class of its members, or (b) persons using or seeking to use its services, with respect to any of the services or activities specified in its recognition order.

• (c) after subsection (7) insert—

(7A) In subsections (1) and (2), “recognised body” includes an EEA CSD.

• (19) In section 293A (information: compliance with EU requirements)—

• (a) the existing text becomes subsection (1);

• (b) after subsection (1) insert—

(2) The Bank of England may require an EEA CSD which provides any services referred to in the Annex to the CSD regulation in the United Kingdom to give the Bank reports on those services and statistical information relating to those services, at such times or in respect of such periods as may be specified by the Bank. (3) A requirement under subsection (2) extends only to information which the Bank may reasonably require for the exercise of its functions under the CSD regulation or any directly applicable EU regulation made under the CSD regulation.

• (20) In section 294 (modification or waiver of rules), after subsection (6) insert—

(7) In this section, “recognised body”, in relation to rules made under section 293, includes an EEA CSD.

• (21) After section 295 (notification: overseas investment exchanges and overseas clearing houses) insert—

(295A) (1) For the purposes of Article 24(1) of the CSD regulation (co-operation in relation to branches of EEA CSDs), the Bank of England may, on giving reasonable notice and at any reasonable time, carry out an on-site inspection of any branch maintained by an EEA CSD in the United Kingdom. (2) Before carrying out an on-site inspection under subsection (1), the Bank of England must inform the competent authority of the EEA State in which the EEA CSD is established. (3) The Bank of England's power under subsection (1) is enforceable, on the application of the Bank of England, by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988 .

• (22) In section 296 (appropriate regulator's power to give directions)—

• (a) in subsection (1A), after “on it by” insert “ or under ”;

• (b) after subsection (1A) insert—

(1B) This section also applies in the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation if it appears to the Bank of England that it is appropriate to give a direction to an EEA CSD in relation to any services referred to in the Annex to the CSD regulation which the EEA CSD provides in the United Kingdom, in order to ensure its compliance with obligations arising from the CSD regulation or any directly applicable EU regulation made under the CSD regulation.

• (c) in subsection (2), for “the body” substitute “ the recognised body or EEA CSD ”;

• (d) after subsection (2A) insert—

(2B) In the case of an EEA CSD, the steps mentioned in subsection (2) may include— (a) the granting to the Bank of England of access to any premises of the EEA CSD situated in the United Kingdom for the purpose of inspecting— (i) those premises; or (ii) any documents on the premises which appear to the Bank of England to be relevant for the purpose mentioned in subsection (2)(b); (b) the suspension for the period specified in the direction of the carrying on in the United Kingdom by the EEA CSD of any activity in respect of which the EEA CSD is exempt from the general prohibition.

• (23) In section 297 (revoking recognition)—

• (a) after subsection (1A) insert—

(1B) A CSD recognition order may be revoked by an order made by the Bank of England in accordance with Article 20 of the CSD regulation.

• (b) in subsections (2), (2A) and (2D) after “recognised central counterparty” insert “ or a recognised CSD ”.

• (24) In section 298 (directions and revocation: procedure)—

• (a) in subsection (1), for “297(2),” substitute “ 297(1B), (2), ”;

• (b) in subsection (6), after paragraph (a) insert—

and (aa) in the case of a direction under section 296 given to a recognised CSD or an EEA CSD or a revocation order under section 297(1B), give the recognised CSD or EEA CSD reasons for its decision.

• (c) in subsection (6A), after paragraph (a) insert—

(aa) gives any other direction under section 296 to a recognised CSD; (ab) gives a direction under section 296 to an EEA CSD; (ac) makes a revocation order under section 297(1B);

• (d) after subsection (7) insert—

(7A) Subsection (7) does not apply in relation to a direction given to a recognised CSD or EEA CSD under section 296. (7B) But in the circumstances described in the second sub-paragraph of Article 24(5) of the CSD regulation, the Bank of England may give a direction to an EEA CSD under section 296 without following the procedure set out in subsections (1) to (5).

• (e) after subsection (8) insert—

(9) In this section, “recognised body” includes an EEA CSD.

• (25) In section 300 (extension of functions of Tribunal)—

• (a) in subsection (1)—

• (i) omit “or” at the end of paragraph (a);

• (ii) after paragraph (b) insert—

or (c) of one or more central securities depositories in relation to which a recognition order under that section is in force or of such central securities depositories generally.

• (b) in subsection (4), for “or clearing house” substitute “ , clearing house or central securities depository ”.

• (26) In section 300E (power to disallow excessive regulatory provision: supplementary), in subsection (3) for “or recognised central counterparty” substitute “ , recognised central counterparty or recognised CSD ”.

• (27) In section 312E (public censure)—