Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 8

Local laws and regulations should ensure that there is segregation of client assets from the principal assets of their custodian; and no possible claim on client assets in the event of custodian bankruptcy or a similar event. Regulators and markets, to further improve investor protection, should work:

• to ensure clarity on the applicable law on cross border transactions
• to seek international agreement on a legally enforceable definition of finality in a securities transaction
• to ensure that local law fully protects the rights of beneficial owners
• to strengthen securities laws both to secure the rights of the pledgee and the protection accorded to client assets held in Securities Systems.

1.	Under local rules and regulations, what are the segregation requirements for keeping client assets and custodian assets in the depository?	There is an account/sub-account holder system within Caja de Valores S.A. which allows to segregate the assets of investors, who are known as "customers" or "beneficial owners" (comitentes). This circumstance is provided for in Act 20643.
2.	How are clients' assets protected in the event of insolvency of a custodian or depository?	Through its account/sub-account holder system, Caja de Valores S.A. segregates the assets of participants and their customers from its own assets. Should a participant become insolvent, investor/customer's assets cannot be claimed by participant's creditors.
3.	Does local law recognise the existence of beneficial owners who may differ from the legal owner of a security?	The concept of beneficial owner is clearly enshrined within Argentine law. Under the sub-account holder system, CVSA registers allow to identify the final owner of securities held in custody, which are wholly segregated from participants' and depository's assets. Caja de Valores S.A. only places on record the details of sub-account holders and securities held in beneficial owners' sub-accounts. Local law recognizes that the exercise of all corporate actions vested in securities owners (including corporate events) also applies to sub-account holders. The absence of regulation requires that CVSA identify the rights of each beneficial owner and place on record any legal situation that may affect securities held in custody. In turn, since any legal act affecting securities held in custody must be placed on the relevant record so that it may be enforced vis-a-vis third parties, only sub-account holders shall be deemed to be securities owners.
4.	Does local law clearly define the point of time when a settlement, both for the security and the cash involved, achieves finality and thus cannot be unwound?	A definition is not found in law, but in Merval's rules. Merval, according to the National Act no 17811 is a self-regulated corporation setting up trading, clearing and settlement regulations and guarantees in accordance with the controlling government agency (CNV). Caja de Valores S.A. shall not be liable for trade settlement and, for settlement purposes, securities transfer from participants' custody accounts to participants' settlement accounts are instructed directly by such participants. Stock-exchange transactions are settled through Merval; whereas Argenclear is responsible for OTC trade settlement. Both settlement institutions have legal authority to transfer securities ownership, which finally takes place once all the subject cash amounts have been transferred.
5.	Does a pledgee have an absolute right to realise their security at all times?	The Depository assures the pledgee that pledged securities shall be subject to immobilization. In case of pledgor's default, pledgee shall make use of such securities by foreclosing the pledge agreement and/or procuring a court order. Pursuant to the account/sub-account holder system, CVSA registers securities pledge agreements upon the request of participants ("Depositors"), and keeps pledged securities immobilized, even though it shall not manage the core business deriving from such immobilization. Any circumstance relating to the securities pledge, including foreclosure thereof, shall be managed by the participant who shall, in case of occurring any circumstance provided for in the core business, lift the pledge and transfer the securities on behalf of whom it may concern.
6.	Does the depository have loss sharing provisions in its rules, and how would these be applied?	CVSA rules are silent about the notion of loss sharing; however, CVSA shall be liable for lost securities vis-a-vis participants.