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?	Danish investors have their assets segregated on investor accounts and under Danish rules and law domestic and foreign investors' holdings will be clearly separated from the holdings of the Danish Securities Centre and the Danish custodian bank. Hence, the investors will be secured creditors in a bankruptcy situation.
2.	How are clients' assets protected in the event of insolvency of a custodian or depository?	Client's assets do not belong to the depository or the custodian bank. Client's assets are strictly separated from assets belonging to the depository and the custodian bank, and in case of insolvency of the depository, there will be no doubt of the ownership of client assets and the investors will be secured creditors.
3.	Does local law recognise the existence of beneficial owners who may differ from the legal owner of a security?	Yes. Section 72, subsection 2, of the Danish Act on Securities Trading stipulates that it must be stated on the account with the Danish Securities Centre if the account holder is not the owner of the assets or if there is more than one owner.
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?	Yes, this is clearly regulated by the depository in respect of the law.
5.	Does a pledgee have an absolute right to realise their security at all times?	Yes, by notification of one week, or immediately under sections 55 and 56 of the Danish Act on Securities Trading.
6.	Does the depository have loss sharing provisions in its rules, and how would these be applied?	If the depository causes a failure, there is a guarantee fund to cover losses. To date the fund has never been invoked. The size of the guarantee fund is minimum DKK 1,000,000,000 (€135,000,000). A participant contributes with a guarantee, which is calculated yearly as a proportion of his business volume with the depository. A participant contributes with a guarantee of minimum DKK 100,000 (€ 13,500).