Report on the Event

1. Report on the Event

2. Summary Date: Monday 29th and Tuesday 30th August, 2011 Venue: Santiago de Chile - Club El Golf 50 Attendees : 22 Speakers: 9 12 countries represented : Chile - USA – Peru – Bolivia – Argentina – Brazil – Colombia – Rep of South Africa– Costa Rica – Panama – El Salvador –Dominican Republic. Organizers: DCV and ACSDA 2

3. Objectives For internal lawyers of ACSDA members to have their own meeting Share know-how and strategies about their legal responsibilities Exchange valuable experiences

4. Obstacles Currently, there are limited opportunities to hold in depth discussions on legal items The characteristics of the industry (one single central depository per country) ACSDA’s needs to deal with numerous topics at its meetings (General Assemblies, seminars, ALF)

5. Proposal Starting point for undertaking specific items • Agenda: • Unidroit and The Hague Conventions • Digital proof and the use of an electronic signature • Cross-border links (legal challenges and taxation aspects) • New CPSS and IOSCO principles on market infrastructure • Corporate Governance 5

6. ACSDA Legal Workshop 6

7. ACSDA Legal Workshop 7

8. The Hague Convention • It is a response to the legal controversy that occurs in the international markets when there are transactions with securities, and taxes are levied on the securities in custody accounts in a system with different levels of indirect holders of securities until it reaches the beneficial owner. • Levels: • Investors • Depositors • Custody of local or international securities • Each level is governed by its own local legislation, and as a result this can create a legal controversy. • It is necessary to search for standard legislation to deal with such important matters 8

9. The Hague Convention (cont’d) • Legal security in the holdings of securities and in the nature of the rights over them • The transfer from a physical holding of securities to a Book-Entry system is specially taken into consideration • Principle for the application of PRIMA (PLACE OF RELEVANT INTERMEDIARY APPROACH): • The item which determines the applicable law goes from the place of origin to the place where the INTERMEDIARY that holds the security account is based 9

10. Geneva Convention – UNIDROIT • UNIDROIT: INTERNATIONAL INSTITUTE FOR THE STANDARDIZATION OF PRIVATE LAW • Problem: Market realities and technological developments have outpaced the legislation based on the holding of PHYSICAL SECURITIES • The legislation must be updated in order to conform to a BOOK-ENTRY system and to the functioning of GLOBAL MARKETS, since the current situation does not produce any LEGAL CERTAINTY in international operations. 10

11. Geneva Convention – UNIDROIT (cont’d) • Objectives • Enhance the legal framework for the holding, transfer and granting of warranties • Reconcile and provide legal certainty for the different legal systems • UNIFORM LEGAL PROCESSING. • That the title holder of the securities shall be confident that the entry in its favor is exceptionable with respect to the broker and third parties, and that he is covered in case of insolvency. 11

12. Digital proof and use of the electronic signature • The importance of appropriate storage for digital data was highlighted • It is relevant to establish procedures and storage standards for the data with the purpose of positively showing the following: • Who created the data • Date and time of configuration • That the corresponding application was functioning on the date and time when the record was created • That the data being stored is complete • Determine the path followed by the data in order to be able to trace it • Prove that the data has not been altered It is important to establish a “storage protocol” that will always be exactly adhered to, providing confidence, and in the event of any legal dispute the stored data shall become valid proof. 12

13. Legal challenges to cross-border links • European Commission – Legal certainty working group • It is trying to overcome the barriers presented by the international clearing and settlement systems • Fifteen barriers were identified and grouped into three different categories: • Legal Certainty • Technical requirements and local practices • Different taxation schemes • A search for an appropriate solution which will assist in overcoming these barriers : • Implement standards, regulations and laws with common principles • That market participants feel safe without paying high fees along with appropriate regulations and supervision 13

14. Legal challenges to cross-border links (cont’d) • MILA: problems similar to those in the European market: • Different regulatory frameworks, different systems for accounts, different taxation of dividends and capital gains • MILA challenges: • Analysis of the regulatory framework • Mechanism for having access to securities data • Assessment of the characteristics for agent routing • Exercising of investor political and proprietary rights • Minimum required content in the contracts between agents, stock exchanges and depositors • How were the MILA challenges met? • Issue of the corresponding regulations in order to implement the MILA • Operate with the same level of accounts, i.e. with omnibus accounts • . • Contracts where the three depositories standardized their rights and responsibilities reciprocally • Procedures with issuers that investors must observe in order to exercise their voting rights at shareholders’ meetings 14

15. Taxation Items in Cross-border Links • Double taxation • Principal aspects: nationality, source of income, registered office or residence. • Options for mitigating the effects • Bilateral treaties, exemptions, deductions, tax credits. • Handling of Dividends • Tax release versus withholding • Complete taxation at the source versus a scaled taxation • Increased value with the sale of shares • Is it taxable income, or exempt, or conditionally exempt • Administrative Situation • Need to register the foreign investor • Need to act through a local attorney (resident) • An agent responsible for compliance with taxation responsibilities

16. New CPSS-IOSCO principles • CPSS: PAYMENT COMMITTEE • IOSCO: REGULATORS • OBJECTIVE. • Standardize and strengthen the clearing and payment systems in the organizations that use balanced entries. • There are traditional principles which are reiterated as well as new principles. • Amongst the new: • Solid framework for risk management, both active and passive • Determine the courses of action that might be taken in the event of a participant’s default in order to continue fulfilling its obligations • Maintain an adequate amount of net assets to cover any losses and to continue providing services • Provide exact and timely data to the authorities 16

17. Corporate Governance • Objective: • Determine the most suitable type of Board of Directors for a securities depository; so that it will be a well structured body which will perform its functions in the best possible way. • To include or not professionals not interested in the business, or on the other hand that they be close to the business even though they do not have such an advanced education • To establish or not a minimum amount of experience • Optimize the Board’s procedures, and taking into account the following: • Is it useful to have members not familiar with the business? • What type of personalities should be avoided? • Should the members be assessed? • Should the assessment be made public, considering the need to have market acceptance and confidence? • Involve the Board in the company’s business plan 17

18. Conclusions and following actions Possibility of ratifying ACSDA’s Legal Committee Organization of subsequent follow up meetings • How often • Agenda Possibility of transferring this format to other ACSDA working groups

19. Camaraderie 19