Compliance Report ISSA Recommendations 2000

ISSA - International Securtities Services Association

Compliance to the ISSA Recommendations 2000

Market: Poland

Status: October 23, 2001

Recommendation 1
Recommendation 2
Recommendation 3
Recommendation 4

Recommendation 5
Recommendation 6
Recommendation 7
Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1. Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents? The National Depository organises and manages an automatic lending and borrowing system (but the pool of assets remains small and participation is limited only to clearing members). The system is used to prevent or to eliminate the settlement failure of a transaction, which is covered by the settlement guarantee system. The Depository's role in the initiation of an automatic loan begins with the confirmation of a lack of securities necessary for the settlement of a transaction on the clearing member's depository account. The participation in the lending and borrowing system is mandatory for clearing participants.

2. Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest? No.

3. Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover? The National Depository manages a Settlement Guarantee Fund that ensures that obligations relating to transactions concluded on the regulated market and covered by this system are met. The settlement of transactions guaranteed by the Settlement Guarantee Fund is mandatory, subject to the penalty of revocation of Depository participation status. The Fund can be used when transaction remains unsettled by a participant and in the event of insolvency of a participant. The National Depository also manages an Investor Compensation Fund, which guarantees investors' assets in the event of the bankruptcy of a broker or custodian.

4. Are the stock transfer agents (share registrars) linked electronically to the depository? Securities are not admitted to public trading in paper form. Proprietary rights are recorded by means of registration on a securities account held by institutions entitled by law to maintain securities accounts (brokerage houses, banks and the National Depository for Securities). Those institutions are linked to the National Depository using the Electronic System for the Distribution of Information network.

5. Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline? Institutions managing security accounts are obliged to update information on the registration of securities, on the day they have received that day's depository account statements from the KDPW.

6. Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced? Proprietary rights from securities admitted to public trading arise the moment these securities are registered on the securities account. They belong to the owner of that account. Although in the case of regulated market transactions, guaranteed by a Settlement Guarantee Fund, a securities purchaser has the right to sell securities before they have been registered on the securities account. Registration on the securities account takes place once a transaction has been settled in the Depository.

Where the record day coincides with the day the transaction is to be settled in the National Depository, or later, and the securities remain registered on the seller's account, once these securities are registered on the purchaser's account, dividend and other benefit rights are also transferred. However, in the event of a shortage of securities on the seller's account as a result of an incorrectly concluded transaction, the value of the predefined benefits is subtracted from the amount of the payment due from the purchaser.

7. Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method? A shareholder that is unable to take part directly in an Annual Shareholders' Meeting has the right to indicate a proxy.

8. Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions? The Company Code defines the minimum and maximum periods between the announcement and execution of operations such as: the announcement of the date of an Annual Shareholders' Meeting, the raising of the level of share capital and the payment of dividends or interests.

9. Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors? According to securities law all corporate actions relating to the public companies are subject to announcements via the mass media before they are carried out. Information on corporate actions carried out by the National Depository is sent to all the Depository participants using the Electronic System for the Distribution of Information network.

10. Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion? In the event of a raising of the level of share capital or a dividend payment by an issuer, the National Depository announces the dates of these operations immediately on receipt of the appropriate resolutions from the Annual Shareholders' Meeting. Information relating to operations such as assimilations or share exchanges is sent to the participants not later than three days before the operation is due to be carried out.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	The National Depository organises and manages an automatic lending and borrowing system (but the pool of assets remains small and participation is limited only to clearing members). The system is used to prevent or to eliminate the settlement failure of a transaction, which is covered by the settlement guarantee system. The Depository's role in the initiation of an automatic loan begins with the confirmation of a lack of securities necessary for the settlement of a transaction on the clearing member's depository account. The participation in the lending and borrowing system is mandatory for clearing participants.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	No.
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	The National Depository manages a Settlement Guarantee Fund that ensures that obligations relating to transactions concluded on the regulated market and covered by this system are met. The settlement of transactions guaranteed by the Settlement Guarantee Fund is mandatory, subject to the penalty of revocation of Depository participation status. The Fund can be used when transaction remains unsettled by a participant and in the event of insolvency of a participant. The National Depository also manages an Investor Compensation Fund, which guarantees investors' assets in the event of the bankruptcy of a broker or custodian.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	Securities are not admitted to public trading in paper form. Proprietary rights are recorded by means of registration on a securities account held by institutions entitled by law to maintain securities accounts (brokerage houses, banks and the National Depository for Securities). Those institutions are linked to the National Depository using the Electronic System for the Distribution of Information network.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	Institutions managing security accounts are obliged to update information on the registration of securities, on the day they have received that day's depository account statements from the KDPW.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Proprietary rights from securities admitted to public trading arise the moment these securities are registered on the securities account. They belong to the owner of that account. Although in the case of regulated market transactions, guaranteed by a Settlement Guarantee Fund, a securities purchaser has the right to sell securities before they have been registered on the securities account. Registration on the securities account takes place once a transaction has been settled in the Depository. Where the record day coincides with the day the transaction is to be settled in the National Depository, or later, and the securities remain registered on the seller's account, once these securities are registered on the purchaser's account, dividend and other benefit rights are also transferred. However, in the event of a shortage of securities on the seller's account as a result of an incorrectly concluded transaction, the value of the predefined benefits is subtracted from the amount of the payment due from the purchaser.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	A shareholder that is unable to take part directly in an Annual Shareholders' Meeting has the right to indicate a proxy.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	The Company Code defines the minimum and maximum periods between the announcement and execution of operations such as: the announcement of the date of an Annual Shareholders' Meeting, the raising of the level of share capital and the payment of dividends or interests.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	According to securities law all corporate actions relating to the public companies are subject to announcements via the mass media before they are carried out. Information on corporate actions carried out by the National Depository is sent to all the Depository participants using the Electronic System for the Distribution of Information network.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	In the event of a raising of the level of share capital or a dividend payment by an issuer, the National Depository announces the dates of these operations immediately on receipt of the appropriate resolutions from the Annual Shareholders' Meeting. Information relating to operations such as assimilations or share exchanges is sent to the participants not later than three days before the operation is due to be carried out.