South Africa: Numbered Acts

NO. 70 OF 1996: SAFE DEPOSIT OF SECURITIES AMENDMENT ACT, 1996.

PRESIDENT'S OFFICE No. 1870.

20 November 1996

NO. 70 OF 1996: SAFE DEPOSIT OF SECURITIES AMENDMENT ACT, 1996.

It is hereby notified that the President has assented to the following Act which is hereby published for general information:-

GENERAL EXPLANATORY NOTE:

Words in bold type indicate omissions from existing enactments. Words in italics indicate insertions in existing enactments.

ACT

To amend the Safe Deposit of Securities Act, 1992, so as to amend, delete

or insert certain definitions; to further regulate the deposit of securities with a depositary institution and with a central securities depository; to provide that a depositary institution may disclose certain information to an issuer of securities; to regulate a certain cession of securities; to further regulate the deliveries of securities; to empower the Registrar of Financial Markets to amend terms and conditions subject to which a central securities depository had been registered; to extend the provisions relating to the rules of a central securities depository; to effect certain technical amendments to the Act; and to provide for matters connected therewith.

(English text signed by the President.) (Assented to 6 November 1996.)

^{BE IT ENACTED by the Parliament of the Republic of South Africa, as}

follows:-

Amendment of section 1 of Act 85 of 1992, as amended by section 70 of Act

104 of 1993

1. Section 1 of the Safe Deposit of Securities Act, 1992 (Act No. 85 of

1992), hereinafter referred to as the principal Act, is hereby amended-

(a) by the substitution for the definition of "central securities account" of the following definition:

" 'central securities account' means an account kept by a central securities depository for a depositary institution participant

and reflecting the number or nominal value of securities of each kind deposited for safe deposit and all entries made in respect of

^{such securities account;";}

(b) by the substitution for the definition of "central securities repository" of the following definition:

" 'central securities repository' means a central collection of securities repository of the same kind as contemplated in section 11; ";

(c) by the insertion after the definition of "central securities

repository" of the following definitions:

" 'client' means any person, including a depositary institution, who deposits securities with a depositary institution for the purposes of this Act and who may be the beneficial owner of such securities;

'controlling body', in relation to a central securities depository, means the board of directors of the central securities depository;

'deposit' means a deposit of securities for safe custody;"; (d) by the deletion of the definition of "depositor";

^{(e) by the substitution for the definition of "depositary institution" of}

the following definition:

" 'depositary institution' means an institution or a person or category of persons authorized by the Registrar to hold securities in safe deposit for the purposes of this Act;";

(f) by the insertion after the definition of "depositary institution" of the following definition:

" 'directive' means a directive issued by a central securities depository in terms of the rules;";

(g) by the substitution for the definition of "entry" of the following definition:

" 'entry' includes an electronic recording of any deposit, withdrawal, transfer, attachment, or pledge, cession in

securitatem debiti or other transaction in respect of an interest in securities;";

(h) by the insertion after the definition of "entry" of the following definition:

" 'issuer' means a person who issues securities and whose securities are accepted for deposit by a depositary institution or by a central securities depository, as the case may be;";

(i) by the insertion after the definition of "Minister" of the following definition:

" 'participant' means a depositary institution accepted by a central securities depository as a participant in terms of section 2(1A);";

(j) by the substitution for the definition of "securities account" of the following definition:

" 'securities account' means an account kept by or on behalf of a depositary institution for a depositor client and reflecting the number or nominal value of securities of each kind deposited for safe deposit and all entries made in respect of such securities relating

^{to such client;";}

(k) by the insertion after the definition of "securities account" of the following definition:

" 'securities of the same kind' means securities of the same class and issued by the same issuer;"; and

(l) by the substitution for the definition of "securities repository" of the following definition:

" 'securities repository' means all a collection of securities of the same kind held by-

(a) a depositary institution; and

(b) another depositary institution or a central securities depository with which the depositary institution mentioned in subparagraph (a) has deposited or re-deposited securities of that kind; and

(c) a central securities depository with which the other depositary institution mentioned in subparagraph (b) has deposited or

re-deposited securities of that kind as contemplated in section

^{3; ".}

Substitution of section 2 of Act 85 of 1992

2. The following section is hereby substituted for section 2 of the principal Act:

"Deposit of securities

2. (1) The Registrar may-

^{(a) authorise any person; or}

3. The following section is hereby substituted for section 3 of the principal Act:

"Securities repository

3. (1) A depositary institution holding securities may hold all securities of the same kind deposited with it for safe custody collectively in a separate securities repository.

(2) A depositary institution shall notify the client having a securities account with it of any entry made in such account.

(3) A depositary institution shall on request disclose information with regard to the holdings of a client in a securities repository, unless the client concerned directs otherwise in writing.".

Substitution of section 4 of Act 85 of 1992

4. The following section is hereby substituted for section 4 of the principal Act:

^{"Ownership of securities}

interest in securities held by a depositary institution in a securities repository shall be effected by agreement completed by entry in the securities account of-

(a) the pledgor in favour of the pledgee specifying the name of the pledgee, the interest pledged and the date; or

(b) the cedent in favour of the cessionary specifying the name of the cessionary, the interest ceded and the date, as the case may be.

(2) Such an interest shall not be transferred except with the written consent of the pledgee or cessionary.

(3) The pledgee or cessionary of such an interest shall be entitled to all the rights of a pledgee or cessionary in securitatem debiti of movable corporeal property in possession of that property.".

Repeal of section 7 of Act 85 of 1992

6. Section 7 of the principal Act is hereby repealed. Substitution of section 8 of Act 85 of 1992

^{7. The following section is hereby substituted for section 8 of the}

principal Act:

^{"Delivery of securities}

as a central securities depository; and

(c) that the business of the applicant will be conducted in a prudent manner and with due regard to the rights of depositors,

members clients, participants and issuers of securities;

^and

securities account with a central securities depository, and to-

(a) deposit securities with or withdraw securities from that depository; or

(b) transfer, pledge or cede securities through the medium of that depository.

(2) If the owner In the event of rights being exercised in respect of securities deposited by a depositary institution with a central securities depository wishes to exercise his such rights

he shall do so be exercised through that depositary institution a participant, and that depositary institution participant shall exercise those rights in its own name on behalf of the relevant clients.";

and

(b) by the addition of the following subsections:

"(4) (a) No central securities depository or depositary institution shall become the owner, co-owner, holder, pledgee or cessionary in securitatem debiti, of securities merely because of-

(i) a deposit of securities; or

(ii) the registration in its name of- (aa) securities;

(bb) limited rights in securities; (cc) other rights in securities;

^{(dd) benefits in respect of securities; or}

(ee) benefits accruing to securities.

(b) Paragraph (a) shall also apply to a wholly owned subsidiary (as defined in section 1(1) of the Companies Act, 1973 (Act No. 61 of

1973)) of a central securities depository or depositary institution.

(5) A central securities depository shall not be obliged to recognise any relationship of trust or agency of its participants in respect of securities.

(2) A central securities repository shall comprise all securities of the same kind held by the central securities depository.

(3) The provisions of sections 5 and 6 shall apply mutatis mutandis to the transfer, and pledge and cession in securitatem debiti by one depositary institution participant to another of an interest in

securities held in deposit by a central securities depository in safe deposit.

(4) A central securities depository shall notify the depositary institution participant having a central securities account with it of any entry made in such account.".

Substitution of section 12 of Act 85 of 1992, as amended by section 72 of

Act 104 of 1993

11. (1) The following section is hereby substituted for section 12 of the principal Act:

"Rules of central securities depository

12. (1) The rules of any central securities depository shall be framed so as to ensure, to the satisfaction of the Registrar-

(a) that the business of the central securities depository is carried out with due regard to the public interest and the interests of depositors, members owners, clients, participants and the

^{issuers of securities;}

(b) that the central securities depository is managed and administered

in an efficient manner;

(c) that only a person or category of persons approved authorised by the Registrar is admitted as a member of the central securities depository to act as a depository

institution in terms of section 2(1) and accepted by the central securities depository in terms of section 2(1A) may be

a participant and that the rules governing the admission acceptance and expulsion of a person as a member participant are equitable and in the public interest;

(d) that the central securities accounts kept for depositary institutions each participant are conducted with due regard to their interests;

(e) that adequate steps are available against any depositary institution participant which contravenes or fails to comply with the provisions any provision of this Act, or

^{these the rules, interim rules or directives, and-}

with

entered respect

(iv) that a central securities depository may take into account any relevant information at a hearing, including information provided to it by the Registrar in accordance

section 18(2)(b);

(f) that each of the participants is financially sound and has into, and is maintaining, valid and adequate guarantees in of-

(i) its actual and potential liabilities; and

(ii) conditional and contingent liabilities to the central securities depository; and

(iii) liabilities which existed before, or accrue after, a person has ceased to be a participant;

(g) that adequate steps are taken on a regular basis by a central securities depository and by its participants according to generally accepted accounting practice for the auditing of the central securities accounts held by it and securities

accounts, as the case may be, and that where the securities accounts and central securities accounts are not kept by the making of entries in bound books, adequate precautions are taken for guarding against falsification and for the ascertainment of the interest of the owner of securities;

(h) that proper measures are taken to pay to the depositors participants or clients all dividends and other payments made by the issuer issuers of securities and to convey to them

^{all notices regarding rights and other benefits accruing to the}

securities and to give effect to the lawful instructions of the depositors participants or clients with regard to voting

rights and other matters and to ensure that the rights of depositors participants or clients are not in any way diminished by the fact that securities held by them or on their behalf are held collectively in a central securities repository as provided for by this Act; and

(i) that fees and charges required by it for its services shall be made known to its depositors and members participants and

that the fees and charges required by a participant for its services shall be made known to its client;

(j) that proper measures are taken by a participant-

(i) to pay clients all moneys in respect of securities received by a participant from the central securities depository or issuer or a company; and

(ii) to convey to clients all information regarding rights and other benefits accruing to the securities; and

(iii) to give effect to the lawful instructions of clients with regard to voting rights and other matters; and

(iv) to ensure that the rights of clients are not in any way diminished by the fact that securities held on their behalf are held collectively in a securities repository or central securities repository as provided for by this Act;

(k) that, on written request from an owner or client of an interest in

securities held in a securities repository or central securities repository, a participant be required to deliver the same number of securities, or securities of the same nominal value and of the same kind, as the securities held on behalf of that owner or client in a securities repository or central securities repository, as long as the owner or client has a sufficient unencumbered credit balance of securities with the participant;

(l) that a participant's central securities accounts shall be prohibited from showing a debit balance;

(m) that a central securities depository shall be entitled to issue directives and interim rules;

(n) that a central securities depository may refuse to accept securities from any particular issuer of securities;

(o) that a central securities depository may keep records of clients, owners and beneficial owners of securities and limited or other interests in the securities;

(p) that the right of participants to withdraw instruments in respect of securities be subject to a time limit from the date and time

of

deposit;

(q) that provisions are made for instructions to be given by participants to a central securities depository.

(1A) The rules of any central securities depository may provide, to the satisfaction of the Registrar, for the limitation of the liability of the central securities depository, a director, officer, employee or representative of the central securities depository, or any member of the controlling body or subcommittee of the controlling body, for any loss sustained by or damage caused to any person as a result of anything done or omitted by the central securities depository, a director, officer,

^employee,

representative or member in the bona fide or negligent (but not grossly negligent) exercise of any power or carrying out of any duty or performance of any function under or in terms of this Act or the rules.

(1B) Subject to this Act and the approval of the Registrar, the controlling body may make rules with regard to any matter which is

necessary

or expedient in order to achieve the objects of this Act.

(2) At the request of the The Registrar shall as soon as

possible after granting an application for the registration of a central securities depository, shall publish its rules cause the rules of the central securities depository and a list of its members as directed by the Registrar, at its own participants to be published in the Gazette in English and one other official language at the expense of the central securities depository concerned.

(3) No addition to, amendment of or deletion from (other than a suspension of) the rules of a central securities depository or the said list of members participants shall be valid until unless-

(a) it has been approved by the Registrar in writing;

(b) against payment of the prescribed fee has been paid; and

(c) a date has been stipulated in the Registrar's approval for the coming into operation of the addition, amendment or deletion.

(4) A Upon receipt of an application for approval in terms of

subsection (3), the Registrar shall cause to be published at the expense of the central securities depository in English and one other official

language

in the Gazette a notice setting out the proposed addition to, amendment of or deletion from the said rules or the list of members, shall be published by notice in the Gazette by the central securities depository in both official languages participants.

(5) (a) The said notice shall call upon members of the public who

^{have objections to the proposed addition, amendment or deletion, to lodge}

such objections with the Registrar within a period of 30 days from the date of publication in the Gazette.

(b) The Registrar shall consider the objections, if any, and shall approve or disapprove of the addition, amendment or deletion within a

period

of two months after expiry of the period referred to in paragraph (a).

(c) The Registrar may, within the period of two months contemplated in paragraph (b), extend that period by notice to the central securities depository concerned for a period which in the circumstances is reasonable.

mutatis mutandis have the same legal effect as a contravention of or non-compliance with a rule.

(8) The provisions of any rule made under this section shall be binding on all participants and on every person utilising the services of a participant.".

Amendment of section 13 of Act 85 of 1992

12. Section 13 of the principal Act is hereby amended by the substitution for subsection (1) of the following subsection:

"(1) The attachment of an interest in securities deposited for safe custody with a depositary institution and comprised held in a securities repository or central securities repository shall only be complete when-

(a) notice of the attachment has been given in writing by the sheriff to the depositary institution;

(b) the sheriff has taken possession of any securities account as evidenced by a certificate written acknowledgement issued

by a central securities depository or member of such depository, as the case may be, participant or has certified that he

or she has been unable, despite diligent search, to obtain possession of such certificate written acknowledgement;

^and

repository, a depositor participant or depositary institution, and for such purposes the central securities depository, member, central securities repository, depositor participant or depositary institution shall be deemed to be a financial institution, and the Registrar as defined in section 1 of this Act shall to be the registrar in relation to the central securities depository, member, central securities repository, depositor or depositary institution

defined in section 1 of the Inspection of Financial Institutions Act,

^1984.";

(b) by the substitution for paragraph (b) of subsection (2) of the following paragraph:

"(b) the proviso to section 8(1) thereof shall be construed as if the following further proviso paragraph were added at the end thereof:

'(e) the registrarmay in his discretionshallcommunicate to

^{the controlling body of a central securities depositoryany}

relevantinformation obtained by himthe registrarin the$

course of an inspection under this Act, or from a report by an inspector on such an inspection of the affairs of a person

who is or was a member of that central securities depository.' "; and

(c) by the deletion of subsection (3). Substitution of long title of Act 85 of 1992

^{15. The following long title is hereby substituted for the long title of}

the principal Act: "To provide for the registration of a central securities depository for the safe custody of securities in terms of a predetermined set of rules; to permit a depositary institution to become a member

^{participant of a central securities depository; to permit investors}

clients to deposit securities through a depositary institution participant with a central securities depository; and to provide for the ownership, transfer, pledge and delivery of securities held in safe custody; and to provide for matters connected therewith.".

Short title

16. This Act shall be called the Safe Deposit of Securities Amendment Act,

1996.