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?	Under local rules and regulations, assets must be segregated in the name of the final beneficial owner, thus separate accounts should be kept at the depository.
2.	How are clients' assets protected in the event of insolvency of a custodian or depository?	The Central Depository Law, segregates own assets from participants' assets. Client's assets are held in the final beneficiary's name and shall be accessible by the investor in case of bankruptcy of any of the custodian or depository.
3.	Does local law recognise the existence of beneficial owners who may differ from the legal owner of a security?	No, it does not recognise the existence of beneficial owners different from the legal owner of the security.
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, legal framework clearly established when cash and securities transfers become final and irrevocable.
5.	Does a pledgee have an absolute right to realise their security at all times?	No, it does not.
6.	Does the depository have loss sharing provisions in its rules, and how would these be applied?	No, it does not.