MB Approves New Regulations on Securities Custodianship and Securities Registry Operations

​The Monetary Board approved the amendments to the regulations on securities custodianship and securities registry operations, which aim to simplify the licensing process and expand both the client base and the number of financial institutions offering said services. The said amendments are part of the commitment of the Bangko Sentral to contribute to the development of the domestic capital market and strengthen investor protection.

Bangko Sentral Governor, Benjamin E. Diokno said that 'The new rules will attract more players in the industry while ensuring that only BSP-supervised financial institutions (BSFIs) with robust risk management and governance systems as well as appropriate information technology infrastructure will offer securities custodianship and securities registry services.' Governor Diokno added that 'This will complement existing initiatives to expand investment opportunities for the public and at same time ensure that their interests are adequately protected.'

The enhanced rules require BSFIs that intend to engage in securities custodianship and securities registry operations to only notify the BSP of their intention to engage in said activities and to submit a certification of compliance with the prudential criteria and pre-qualification requirements set out. The pre-qualification requirements emphasize the importance of the independence of the securities custodianship operations from the securities underwriting, dealing, or brokering operations of the BSFIs. The said requirements likewise include having robust information technology infrastructure to support securities custodian and registry operations.

The amended regulations also allow BSFIs to perform securities custodianship/ registry services for a related party provided that appropriate safeguards and controls on related party transactions are adopted to prevent conflict of interest on the said arrangement. Further, the amended rules provide an option for a securities seller to perform self-managed securities custodianship arrangement where securities sold to or managed on behalf of a BSFI's clients to be maintained under a BSFI's own unit performing securities custodian services, subject to compliance with the minimum prudential controls. Such BSFIs are however prohibited from performing securities custodianship/ registry services to its own securities issued.

The new rules prescribe the measures to strengthen client/investor protection by setting the supervisory expectations on disclosure and reporting requirements to clients, the conduct of customer due diligence (CDD), and record keeping.​