Omnibus securities accounts in Poland
15.09.2011 new provisions | capital markets
From 2012, foreign investors wishing to invest directly in financial instruments in Poland should no longer need to open a securities account at a Polish brokerage or trust company.
On 18 August 2011 the lower house of the Polish Parliament passed the Act Amending the Act on Trading in Financial Instruments and Certain Other Acts, which would authorise omnibus securities accounts in Poland. The amendment is now being considered by the Senate. If enacted, the new regulations would go into force on 1 January 2012.
Now, any person investing in publicly traded securities, e.g. shares listed on the Warsaw Stock Exchange, must hold a securities account maintained for the investor by a brokerage or trust company. Because of the additional formalities required, this requirement probably presents a significant barrier to investing in securities in Poland. Introduction of omnibus securities accounts would enable a holder of an account at a foreign depository institution (such as a foreign trust company) to trade in securities in Poland through that account.
Outline of new rules
The act adopted by the Sejm provides that securities belonging to persons other than the holder of the omnibus account could be registered in the account. The act would introduce a fixed list of the types of entities for whom an omnibus account could be maintained, and it is limited to foreign entities, as follows:
a) foreign entities conducting central registration of securities and subject to supervision in a member state of the EU, or in a non-member state that applies regulations against money laundering and financing of terrorism that are consistent with EU law;
b) foreign investment firms authorised in the state where they have their registered office to conduct activity involving registration of financial instruments, but not conducting brokerage activity in Poland, or conducting brokerage activity in Poland without opening a branch here; and
c) foreign legal persons and banks with their registered office in a country that is not a member state of the EU, which applies regulations against money laundering and financing of terrorism that are consistent with EU law, authorised in the country where it has its registered office to conduct activity involving registration of financial instruments.
In Poland, the person regarded as having title to the securities registered in the omnibus account will be the person indicated to the institution maintaining the omnibus account by the holder of the account—not the holder of the omnibus account. The person with title to the securities will be able to exercise corporate rights attached to shares registered in the omnibus account, for example to participate in the general meeting of a public company.
Distribution of benefits deriving from securities registered in an omnibus account to the persons entitled to receive them will be conducted through the holder of the omnibus account, which will receive the benefits due under the securities in the account. Consequently, the beneficiaries of the omnibus account will not have a claim against the institution maintaining the omnibus account for benefits under the securities. They will have a claim only against the holder of the omnibus account.
In order to assure that the new rules operate in compliance with the objectives of money laundering regulations, the holder of the omnibus account will be required, upon request of the Polish Financial Supervision Authority or the General Inspector of Financial Information, to promptly provide information enabling identification of the persons with title to the securities in the omnibus account, and information concerning the number and type of securities held by such persons, or to indicate the client on whose account the securities are registered.
The revised regulations would impose additional obligations on holders of omnibus accounts connected with exercise of rights under securities registered in the accounts. For examples, they would be required to issue depository certificates and individual certification of the right to participate in the general meeting of a public company, with respect to the securities registered in the account.
Enabling the use of omnibus accounts by foreign banks and investment firms would raise the level of competitiveness of the Polish capital market by eliminating transactional barriers. It should also make it easier for foreign investors to invest in financial instruments in Poland. The amendment would bring Polish law closer in line with the approach already functioning in numerous EU countries which allow the use of omnibus accounts.
Marcin Pietkiewicz, Capital Markets practice and Financial Institutions practice, Wardyński & Partners