Dr Panayiotis Alexakis President, CEO Athens Exchange S.A. June 11, 2004

1. OECD – WORLD BANK South Eastern Europe Corporate Governance Roundtable Transparency and Disclosure. Implementation and Enforcement. How to identify beneficial owners Dr Panayiotis Alexakis President, CEO Athens Exchange S.A. June 11, 2004

2. Why is identifying the beneficial owner important? • What is meant by the term “beneficial owner” • Which are the main tools for identifying the beneficial owner? • The Greek experience

3. I. Why is identifying the beneficial owner important? • Registry purposes – Benefits for the issuer • Allowing investors and most importantly retail investors to take decisions based on information, with regard to their participation in an investment – Benefits for the investor • Improving the level of servicing and protecting the end investor – Benefits for for the investor • State supervision – Benefits for the society

4. I.1) Why is identifying the beneficial owner important for registry purposes? • Identifying the beneficial owner helps the issuer to: • perform corporate actions in a more satisfactory and speedy way for all its titleholders. If the issuer knows the identity and location of his shareholders, he can make all necessary arrangements for accomplishing corporate actions (e.g. dividend payments et.c.) efficiently • study the patterns, which international investors follow, when they make their investment decisions. In other words, identifying the beneficial owner is a strong weapon for the company’s IR department • understand significant changes in the shareholders’ structure of the company. These changes may also signal future take-over attempts

5. I.2) Why is identifying the beneficial owner important for investment decisions? The shareholder structure, as well as the exact moment of participation and exit of major investors, is a decisive factor, which helps the investor to take his investment decisions Identifying and revealing the above data is a strong weapon against insider dealing that could take place if an equivalent disclosure regime had not been in place

6. I.3) How is identifying the beneficial owner contributing to investor servicing and protection? • In an ideal world, new technology enabling the employment of STP process at all levels of the transaction, would give the beneficial owner the opportunity to transact directly in the markets, limiting the scope of financial intermediation • Direct registration of the beneficial owner in the central system (for example in the CSD) facilitates the employment of STP at all levels of transaction and practically broadens the beneficial owner’s opportunity for direct access in the markets.

7. I.4) Why is identifying the beneficial owner important for reasons of state supervision? • Money laundering concerns The New EU Directive extends the coverage to a series of non-financial activities and professions that are vulnerable to misuse by money launderers. Requirements as regards client identification, record keeping and reporting of suspicious transactions are therefore extended to external accountants and auditors, real estate agents, notaries, lawyers et.c.. This shows the concern of the EU for preventing money laundering, to which identifying beneficial owner contributes significantly • Global safety concerns • Tax avoidance issues • Special purposes, for which the identity disclosure of the shareholders is deemed as essential. As paradigms: • State contractors • Media companies

8. II) What is meant by the term “beneficial owner” • It is a term derived by the common law “equity” regime. It means the person, who is entitled to enjoy the economic rights stemming from the ownership, although the ownership has been registered in the name of someone else (the legal owner), who holds the object in his own name but on behalf of the beneficial owner • The beneficial owner is the “indirect” owner. Therefore beneficial registration structures are known as “indirect holding”, “nominee registration” or “omnibus holding” structures as opposed to the “end-investor” or “direct holding” structures.

9. Continental property law traditionally lacked beneficial ownership structures. However, indirect holding in a global economy had originally been seen as a practical necessity. To resolve the problem, most continental legal orders incorporated a clause in their insolvency law whereby it was recognized that holdings registered in omnibus accounts were segregated from the pool of asset of the legal owner in his insolvency event. In this way, indirect holding systems became legally safer and business-wise eligible • Systems that chose the end-investor approach on the other hand, were based on a proxy whereby the (natural or legal) person registered in the system, namely the accountholder, was recognized as the final owner of the securities. Improper registration in end-investor systems (namely, registration of merely the legal owner) entailed some degree of legal risk for the beneficial owner, who ran the danger of having a mere contractual claim, instead of a property right, in the case of the legal owner’s insolvency.

10. III) Which are the main tools for identifying the beneficial owner? • The two main tools for beneficial owner identification are: • The obligation to disclose to the market major holdings acquisitions or disposals • The end investor registry system • These tools are not interchangeable, neither from a legal nor from an operative perspective. They serve different needs and perform different functions

11. III.1a) The obligation to disclose • From a legal point of view, the obligation to disclose has, since 1988, been a piece of European legislation (Dir.88/627 later incorporated in the 2001/34 Dir and currently a substantive part of the Transparency Directive) • In the current EU regime, the obligation lies initially with the person who acquires or disposes and at a second level on the issuer, if and when he is informed. The person must make the announcement the seventh calendar day the latest from the day he learnt he has acquired or disposed the shares • The new Transparency Directive extends the period of announcement to 7 trading days and it alters the process: the acquiring or disposing person will be obliged within 4 trading days to notify the issuer, who will within the next 3 trading days, notify the market. • The home Member-State is not prevented from employing a more stringent regime

12. III.1b) The obligation to disclose as a tool of identifying the beneficial owner – Pros and cons • CONS • Significant time lapse of 7 days from the acquisition or disposal • Lack of any central cross-checking mechanism. The disclosure rests on the hands of the beneficial owners • Limited help to the registry function, since only major shareholdings are declarable and the time lapse is considerable • HOWEVER • This tool is a common practice for all markets and is practically easier for very large markets, where the employment of a direct holding structure would possibly require heavy technological investment

13. III.2a) The end – investor approach / pros • The end-investor approach is, as we previously said, legally created by a proxy whereby the person registered as the account owner (normally in a CSD system) is assumed as the final (both legal and beneficial) owner of the securities recorded therein • The end investor system has the effect of the direct disclosure of the beneficial owner identity with the analyzed positive effects for the issuer, the investor, the state control mechanisms et.c. • Direct holding systems are facilitated by the new technology (APIs) • These systems are of a minimum legal and operative risk, since all holdings are directly registered in the database of a CSD, whose risks are minimum in comparison to the custody risks of a chain of intermediaries in an indirect holding system. In addition, issues with regard to the law applicable for the determination of ownership rights receive a more straightforward answer: usually the law applicable will be the one that governs the direct holding system.

14. III.2b) The end – investor approach / cons • Despite gradual unification of technological solutions applied in registry and custody services, the issue remains that direct holding structures appear as demanding from the global custodian, the development of various interfaces that enable him to connect with local systems. Therefore, concentration of back office operations is not encouraged. This disadvantage will gradually disappear with the employment of new technological solutions (APIs) • Proper direct holding registration requires a satisfactory degree of effective and efficient communication between the registry system (normally, the CSD) and its participants (the custodians), which is not always easy. • Direct holding systems must not deprive the investor and most importantly the intermediary of the privilege to keep in anonymity data connected to his/her identity or to the identity of its clients

15. The existence of the proxy with regard to the identity of the beneficial owner (namely, the assumption that the final owner of all the holdings recorded in an account is the account owner) may be seen as arbitrary. The problem is due to improper registration. However this “misuse” of the direct holding system has the following disadvantages: • Discrepancy between the data stemming from the CSD system and those stemming from the major holdings disclosure system, as regards the beneficial owner’s identity. • Wrongful information to the issuer or to other info-receivers • High level of legal risk on the circulation of the title through indirect holding chains, as above described.

16. IV) The Greek experience • The Greek market uses both tools for identifying the beneficial owner of securities • P.D. 51/92 implementing Major Holdings Disclosure Directive into the Greek law has been interpreted restrictively and currently requires the person, who has acquired or disposed, to notify the market on T+1, namely the next trading day • The CSD registry database is oriented to the end-investor, who becomes owner of securities directly from the title-leg CSD settlement on T+3 • CSD registry system facilitates STP and the interconnection between the trading and registry system gradually develops • CSD registry system secures anonymity in the sense that no account operator (the CSD, included) has access to other parts of the investor’s account, unless he is expressly authorized by the account holder.

17. For more informationhttp://www.ase.gr Thank you very much for your attention!