Rwanda
Regulation of the National Bank of Rwanda on the Licensing Requirements Participants in the Central Securities Depository and the Protective Measures of Securities
Regulation 8 of 2010
- Published in Official Gazette special on 30 December 2010
- Assented to on 27 December 2010
- Commenced on 30 December 2010
- [This is the version of this document from 30 December 2010.]
Chapter One
General provisions
Article one – Purpose
This regulation is intended in particular to specify the conditions for access to and pursuit of activities related to the status of a Participant in the CSD and the protective measures of Securities Holders.Article 2 – Definitions of terms
For the purpose of this Regulation, unless the context otherwise requires, the following terms shall mean:"Law": the Law governing holding and circulation of securities;"Third Party Intermediary": an intermediary other than the CSD with which a Participant is authorized to deposit clients' Securities;"Professional Clients":a)The State of Rwanda, national or foreign authorities, public bodies that manage public debt, central banks, international and supranational institutions such as the World Bank, IMF and other similar international organizations;b)a client with the status financial institution of bank, insurance company,c)clients other than those mentioned in points a) and b) who have requested to be treated as Professional Clients, provided that the request came from the clients in writing and that they have been duly informed of the protection scheme they may be deprived of.Other terms used in this Regulation that have been defined in the Law shall have the meaning under this Law.Chapter II
Authorization for taking up the activities of participant
Article 3 – Licensing
Without prejudice to provisions under the law, only a company authorized to do so by the Central Bank may act as a Participant within the meaning of the Law.A company governed by Rwandan law intending to carry out the activity of holding Book-Entry Securities on behalf of third parties in Rwanda is required, before starting operations, to be duly authorized by the Central Bank, irrespective of any other place where it may carry out its activities.Requests for authorization shall be accompanied by a program of operations complying with the conditions laid down by the Central Bank and setting out inter alia the type and the volume of the business proposed, the structure of the institution’s organization, and any close links it has with other persons.The Central Bank shall grant authorization to the institutions meeting the conditions laid down in articles 3, 4, 5, 6, 7 and 8.The Central Bank will give its decision on the application for authorization within three months of presentation of the required information, after receipt of the application.Decisions on authorization will be communicated to the applicants within fifteen days.When granting authorization, the Central Bank may, in the interest of sound and prudent management, impose certain conditions on carrying out some of the activities proposed.Article 4 – Licensing requirements
Authorization may only be granted if the institution making the request meets the following conditions:1°having the status of Bank or intermediaries of the capital market governed by Rwandan law, and2°fulfilling the other requirements provided under this regulation.The Participant must have the resources and procedures which are necessary to carry out the activity of holding Book-entry Securities on behalf of third parties.These requirements relate to matters such as human resources, information systems, accounting, customer protection and the compliance and internal control system.Article 5 – Human resources requirements
In particular, as regards human resources, the Participant draws up a description of various functions and positions needed. This description outlines the skills and qualifications needed to fulfill these positions and functions. A detailed organization chart of the Participant's departments shall also be drawn up. It shall be accompanied by a document describing the role and responsibilities allocated to each of the units identified on the chart.The Participants must demonstrate that staff assigned to manage the information system has the skills in accordance with the quality standards of the information technology (IT) profession.Article 6 – Information technology requirements
Regarding the information system resources, the Participant must have an information processing system suited to its size, its specific characteristics and the volume of transactions that it processes. It must have the hardware and software needed to provide the requisite level of performance and security.The Participant establishes a list of the persons allowed access to its information systems and ensures that all such access is monitored. All instances of access to the Participant’s information systems are logged, and a record is kept of the changes to data processing routines resulting from each access.The general architecture of the information processing system used for securities-holding activities is documented.A list of hardware and software used in the system is drawn up and kept up to date.Article 7 – Accounting procedures requirements
Regarding the accounting procedures, the Participant shall describe its accounting organization in an appropriate document. The accounting organization must meet the following requirements:1°For the purpose of ascertaining and monitoring the rights of Securities Holders, securities accounts shall be kept according to the rules of double-entry bookkeeping, in accordance with the debit/credit principle;2°permanent balance between credit and debit;3°daily accounting of all transactions without delay;4°the simultaneous recording of the transaction in Securities and related financial transactions.Article 8 – Further requirements
Without prejudice of the articles 3, 4, 5, 6 and 7 of this regulation, the institutions non Supervised by the Central Bank wishing to carry out the activities of participant shall further submit to the Central Bank for the obtainment of an authorization:a.Certificate of business registration in Rwanda;b.Evidence that capital market regulator has authorized the intermediaries of the capital markets to operate.Capital requirements for institutions supervised by the Central Bank and those supervised by Capital market regulator shall be those established by relevant legislations.Any other applicant not mentioned by the previous paragraph wishing to carry out participant’s activities shall have a minimum paid up cash capital of not less than 100,000,000 RWFs.Article 9 – Requirements for foreign participant
Securities depository under the laws of another State and authorized pursuant to the law of that State to hold book-entry Securities on behalf of third parties can be authorized to act as Participant under the following conditions:1°that it be subject to legislation providing a supervisory regime whose level of requirements is identical to that provided by the Law and this Regulation;2°the law of the foreign State governing the foreign Participant must allow access to the territory of this State by persons acting on behalf of the Central Bank for the exercise of their supervisory duties.3°A License to operate in the home/base country, where applicable;Article 10 – The prerogative of Central Bank to authorize or not a foreign participant
The Central Bank may refuse to authorize a Participant governed by the law of a State which does not offer reciprocal market access under the same conditions to Participants governed by Rwandan law.The Central Bank may, on a reciprocal basis with the approval of the Minister of Finance, and by means of agreements concluded with the supervisory authorities of the Participant’s home country, lay down rules relating to the obligations, and prohibitions imposed on the Participant in Rwanda, the contents of and the procedures for supervision, and the procedures for co-operation and exchange of information with these authorities.The agreements mentioned by the precedent paragraph shall not contradict the Law and its implementing regulations.In case of opening a branch in Rwanda by a Participant governed by the laws of a foreign State, Articles 3, 4, 5, 6, 7 and 8 of this Regulation shall apply by analogy.Article 11 – The publication of participants
The Central Bank will draw up a list of the Participants which have been granted authorization pursuant to this Chapter. This list and any amendments which have been made to it will be published on the Central Bank's web site.Chapter III
Carrying out the participant's activities
Article 12 – General principle
The Participant must at all times be able to show that the requirements provided under Articles 3 to 8 are being met.Article 13 – Human resources management
An annual training plan is established for staff. It must be suited to their training needs and to the specific function of holding Securities. Pursuant to this plan, all means of training required for proper conduct of the Participant's activities shall be implemented and evaluated on a regular basis.The Participant shall acquire adequate human resources to respond to changes in the capital markets and the technological environment as well as to a permanent or temporary increase in the volume of business.Article 14 – Information system resources management
The Participant shall make sure that the rights it has to its software include updates needed to ensure the required level of performance and safety of its operations.The Participant shall check the quality of information processing on a regular basis. Such quality assessment is based on the criteria specified in the contracts or service agreements between the users and the IT live-production unit. Indicators shall be developed to measure and monitor the frequency of information processing incidents.Both physical and logical security is to be ensured for all information processing and data exchange systems. In particular, the Participant shall ensure that data centres are physically protected and that access to the information processing systems is rigorously monitored.A back-up plan shall be drawn up and appropriate procedures put in place to ensure business continuity.Article 15 – Administrative and accounting procedures
The administration of the Securities of the Participant's clients includes: data on Securities, client data and data relating to Third Party Intermediaries.The data relating to Securities shall provide complete and unambiguous identification of the Securities and their characteristics, including the identification of the issuer, the nature of the instrument, the specific features such as tax status and the prerogatives, including options, enjoyed by the owner.The client data concern customer identification as provided by law and regulations, supplemented by the data necessary for the administration of the Securities of the Participants’ clients.These additional data may concern specific legal relationships such as the fact that the Securities are being given as collateral or are the subject of proceedings for sequestration or that the nature of the rights of the securities account holder consist of a division of ownership.The data relating to Third Party Intermediaries consist of the identification of the Third Party Intermediaries supplemented by the data necessary for the administration of the Securities of the Participant’s clients.Article 16 – The terminology of the securities accounts
The terminology of these accounts and the operating rules applicable to them are specified in a Central Bank instruction. For supervisory purposes, this terminology classifies Securities belonging to collective investment schemes, other clients and to the Participant itself into distinct categories.Article 17 – Liquidity requirements
An ordinary individual securities account shall not be in debit on the settlement date of any security sold therefrom. To fulfil this requirement, the Participant shall establish procedures to:1°identify any trade or disposal that could lead to a debit balance on the securities account at the settlement date;2°prevent the occurrence of such a debit balance.Article 18 – Transactions recording
Transactions shall be recorded on the books as soon as the Participant acknowledges of them and no later than within 24 hours.Every book entry shall be documented either by1°a written document, or by2°unalterable electronic data.Article 19 – The verification of accounting data
The Securities accounting system shall be organized so as to enable verification of the accuracy of the processing procedures.The Securities accounting system shall also be organized so as to enable verification of the data by means of appropriate procedures.Participants shall establish adequate procedures to immediately detect the movements of Securities not completed within the time limits set by the market rules or the rules of payment and settlement systems.Where an expected delivery of Securities is not received by the scheduled date, the Participant shall contact the counterparty as soon as possible to claim the Securities in question.Article 20 – The confirmation of transactions procedures
The Participant shall request the CSD and its Third Party Intermediaries to confirm immediately, in the manner on which they have agreed, every transaction they record. This confirmation shall include at least identification of the Securities and their quantity.Article 21 – The confirmation of the transaction to the client
Each operation on Securities performed by the Participant for a non-professional client shall be confirmed by the Participant to the client on a durable medium.Article 22 – Time for the confirmation of the transaction
The confirmation of the transaction shall take place no later than the first business day following its execution or, if the Participant receives a confirmation of a third party, no later than the first business day following receipt of the confirmation from the third party.The client shall also be informed of the department or the person to whom it may apply in case of any questions about the confirmation or error in the confirmation.Article 23 – Control by participant
The Participant shall periodically check that the accounts and data correspond to those of the CSD and its Third Party Intermediaries. This internal control includes both transaction control and position control.Article 24 – Transaction control
Transaction control shall be performed daily and consists in verifying the equality between the total of all credit entries to accounts and the total of all debit entries in respect of all important features of the operation including the identification of the Security, its quantity, its nominal value and its tax status.Article 25 – The position control
The position control shall be done at least monthly; checking for all the different Securities the balance between Securities deposited with the CSD and with Third Party Intermediaries and the corresponding obligations vis-a-vis the Participant’s clients.To this end, besides the account statements received, the Participant shall regularly request the CSD and its Third Party Intermediaries to provide a detailed statement of its positions, both those they hold for the Participant's own account and those of its clients, in accordance with the manner on which they have agreed. The statement will identify unambiguously at least the Securities and their quantity, their nominal value and, for listed securities, the market value.The positions shall be reconciled on the basis of the quantities and the nominal value.Article 26 – The statements of securities
The Participant shall provide the client regularly, but at least monthly, with a detailed statement of Securities held on its behalf. This statement is to be sent to the client on a durable medium.The statement shall identify the Securities unambiguously and indicate their quantity and their nominal value and, for listed Securities, their market value. The statement shall also indicate cases in which clients' Securities have been used by the Participant and the remuneration paid to the client and the basis on which such remuneration is calculated.Article 27 – Prevention of conflicts of interest
Participants take organizational and administrative measures to prevent conflicts of interest relating to services provided in connection with the holding of Securities or other activities and arising between the Participant, its managers, employees and agents, and any linked company on the one hand, and its clients, on the other hand, or between its clients themselves, from damaging the latter’s interests.Article 28 – Outsourcing
When a Participant assigns to a third party the execution of operational functions necessary to ensuring the provision of services relating to the holding of Securities, it shall take appropriate measures to mitigate the associated operational risk.Outsourcing referred to in subparagraph one may not be conducted in a manner that impairs the adequacy of the Participant’s internal control procedures and or prevents the Central Bank from monitoring whether the Participant complies with its legal and regulatory obligations.Article 29 – Reporting
The Participant shall transmit quarterly to the Central Bank its balance of Securities held on behalf of its clients in accordance with the model determined by the Central Bank.Article 30 – Selection of a foreign depository
Participants are allowed to make a deposit of Securities with a depository other than the CSD only in the case of Securities belonging to the following categories:1°Securities issued by a company governed by foreign law or issued by a foreign State. In this case, without prejudice to point 2 hereafter, the authorization to deposit Securities with a depository other than the CSD applies only to Third Party Intermediaries located in the country whose law governs the issuer of the securities concerned, is under the law applicable to a company;2°Securities, whatever the law governing the issuer, listed on a foreign capital market. In this case, the authorization to deposit Securities with a depository other than the CSD applies only to Third Party Intermediaries located in the country whose law governs the financial market on which the relevant securities are traded.Article 31 – Third Party Intermediaries conditions
For categories of Securities referred to in Article 30, the Participants are permitted to deposit their Securities on behalf of their clients in one or more accounts with Third Party Intermediaries, provided that they act with prudence, care and diligence with regard to the selection, appointment and periodic review of such Third Party Intermediaries and with regard to both legal and contractual provisions that govern the holding and safekeeping of these Securities.In particular, the Participant must take into account the expertise and the reputation of such Third Party Intermediaries and all laws, regulations or market practices related to holding of Securities, including those governing the nature of the rights deriving from book-entry Securities, which may affect even indirectly the rights of their clients.Article 32 – The segregation of securities by Third Party Intermediary
When the Participant deposits Clients' Securities with a Third Party Intermediary, the Participant shall ensure that the accounts of this Third Party Intermediary identify separately the Securities belonging to the clients of the Participant both from those of the Participant itself and those of the Third Party Intermediary. These separate accounts in which clients' Securities are deposited can be omnibus or individualized accounts.When the Participant has a choice between several Third Party Intermediaries, it must favor the Third Party Intermediary with which the nature of the rights deriving from book-entry Securities allows for the recovery of the Securities notwithstanding the opening of an insolvency proceeding affecting this Third Party Intermediary.Article 33 – Third Party Intermediary with specific regulation
The Participant may not deposit Clients' Securities with a Third Party Intermediary unless that Third Party Intermediary is subject to a specific regulation and to a specific prudential supervision for the holding of Securities on behalf of third parties.Article 34 – Third Party Intermediary with no specific regulation
By way of exception to article 33, a participant may deposit clients' Securities with a third party intermediary which is not subject to regulation or to supervision regulating the holding Securities for third parties if:1°the nature of the securities or of the services associated with those securities requires them to be deposited with a country that does not regulate, the holding and safekeeping of Securities; or2°where the securities are held on behalf of a professional client and that client has expressly requested to deposit them with an intermediary located in a country that does not provide such regulation.Chapter IV
Protection measures for securities holders
Article 35 – The authorization to use or to appropriate the client’s securities
The authorization required by the article 10, paragraph 5 of the Law must be written and explicit.Such written authorization, if agreed by a non-professional, retail client, must be subject to a separate document having only this purpose.The requirement to obtain previous authorization from the client referred to in paragraph 1 shall apply to the use of its securities deposited with the Participant or with its Intermediaries, that is to say,1°for any use of Securities held in the books of Participant, and2°for any use relating to Securities held by the Participant for the account of its clients with the CSD or a Third Party Intermediary.In the case referred to in paragraph 2, 2°, where clients' Securities are deposited on omnibus account with a Third Party Intermediary or with the CSD without any segregation being carried in the books of the Third Party Intermediary or the CSD, the client’s Participant cannot use the Securities credited to such an omnibus account unless each client whose Securities are held together in an omnibus account has given prior express consent in accordance with paragraph 1.In the case referred to in paragraph 2, 2°, when the clients' Securities are deposited in segregated accounts allowing their identification at the level of the Third Party Intermediary or at the level of the CSD, the client’s Participant must have in place control systems and which ensure that only Securities belonging to clients who have given prior express consent in accordance with paragraph 1 are so used.In order to enable the correct allocation of any loss, the Participant must ensure the monitoring of information about clients who have given their consent to the use of their Securities and the number of Securities used according to the clients concerned.Article 36 – The designation of an ad hoc agent
An action for recovery as referred to in Article 19.3 Article 19.3 of the Law shall be made on behalf of Securities Holders by an ad hoc agent designated for that purpose by the Central Bank. This agent cannot be the same person as the liquidator.This agent shall perform the necessary steps with the Securities Holders and gathers from them instructions to return their Securities either by way of deposit on their behalf, into an account or otherwise, with other Participants in Rwanda or other depositories abroad.His remuneration shall be determined by the Central Bank and shall be charged to the insolvency proceeding. He enjoys, to this end, the same ranking as the liquidator.Article 37 – The action for recovery of securities authorized to be used in case of default by a Participant
For the purpose of the action for recovery referred to in Article 19 paragraphe 3 of the Law, where securities holders have authorized the Participant pursuant to Article 34 to use their Securities, and provided that such use has occurred within this authorization, they shall, in case of an insolvency proceeding opened against the Participant, receive only the Securities that remain after all the Securities of the same type and issuance belonging to other Securities Holders have been recovered.Chapter V
Final provisions
Article 38 – Repealing provisions
All prior regulatory provisions inconsistent with this Regulation are hereby repealed.Article 39 – Commencement
This regulation shall come into force on the date of its publication in the Official Gazette of the Republic of Rwanda.History of this document
30 December 2010 this version
Commenced
27 December 2010
Assented to
Cited documents 1
Legislation 1
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