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?	SCLV manage the central register containing the aggregate balances of securities of each participating member (segregated into own and third parties account) and this latter one is in charge of the detailed register, in which securities are recorded in the name of each holder, fully segregated from the assets of their custodian.
2.	How are clients' assets protected in the event of insolvency of a custodian or depository?	In case of insolvency of a custodian, the client has the right to transfer its assets to another custodian participating in the system.
3.	Does local law recognise the existence of beneficial owners who may differ from the legal owner of a security?	Spanish Law does not distinguish between legal and beneficial owner. The existence of de facto beneficial owners would have to be proved before the Courts.
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. Spanish regulation has implemented the Finality Directive through Spanish Law 41/1999, of November 12th.
5.	Does a pledgee have an absolute right to realise their security at all times?	Yes.
6.	Does the depository have loss sharing provisions in its rules, and how would these be applied?	Yes. If a participant's collateral is not enough to cover its default, the collateral of other participants is used in a pro-rata basis.