OPINION OF THE EUROPEAN CENTRAL BANK
at the request of the Swedish Ministry of  Finance under Article 109f (6) of the Treaty
establishing the European Comm unity (the Treaty) and Articl e 5.3 of the Statute of the EMI
on a draft legislative proposal regarding the regis tration of financial instruments, replacing the
Share Account Act (1998:987)
CON/98/26
1. The EMI has received a request from the Swed ish Ministry of Finance dated 20 April 1998 for
an opinion on a Government proposal as regards a legislative reform concerning the Swedish
book entry system for dematerialised financial instruments (Lagrådsremiss - Lag omkontoföring av finansiella instrument) (the l egislative proposal). The scope of the legislative
proposal generally corresponds to the provis ions of the present Share Account Act
(aktiekontolagen (1989:827); the Share Account Act).
2. In accordance with Article 109l (2) of the Treaty, the ECB has taken over the advisory
functions of the EMI which has gone into li quidation upon the establishment of the ECB on 1
June 1998. The ECBs competence to deliver an  opinion is based on Article 1.1, fourth and
fifth indents, of the Council Decision (93/717/EC) of  22 November 1993 on the consultation of
the EMI by the authorities of the Member Stat es on draft legislative provisions, as the
legislative proposal contains provisions concer ning the settlement of securities transactions
where financial institutions participate and rule s applicable thereto which may influence the
stability of financial institutions and markets.
3. As part of the legislative proposal, the Swed ish Government has submitted a proposed draft Act
on Registration of Financial Instruments (the N ew Act), which is suggested to replace the
present Share Account Act. In line with the Share Account Act, the New Act is based on a
dematerialised system for registration of secu rities, although the New Act also provides a
possibility for registration of foreign paper-based financial instruments. The objective is to keep
the New Act generally applicable to cover regi stration of all types of financial instruments.
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4. The ECB will not comment on all technical a nd organisational aspects of the legislative
proposal, but it is noted that the monopoly fo r Värdepapperscentralen VPC AB (VPC) to
register securities with legal effect will be a bolished. Instead, companies that comply with the
general conditions provided by the New Act can be authorised as central securities depositaries
(CSDs). The New Act will also provide for a regime for cooperation and create a legalframework for the implementation of links be tween VPC or other Swedish CSDs and their
correpsondents in other countries. In addition, th e ECB notes that other national central banks
than Sveriges Riksbank, including the ECB, woul d be able to participate directly, without an
intermediary, in the activities of VPC and othe r Swedish CSDs. Accordingly, the New Act will
enable central banks of other countries to direc tly register ownership of financial instruments
and collateral security arrangements in respect of  such financial instruments, including plegdes
and liens. As a general principle and a precond ition for such registrations, however, the CSD
concerned will need to appoint the national central bank in question as a share account
institution, which is an entity entitled by a CSD to effectuate registration measures in the
securities register (Share Account Institution) (whereby the arrangement with Share AccountInstitutions can be compared to membership  requirements in other securities settlement
systems).
5. The ECB generally welcomes the legislative proposal and has no objections to the introduction
of the new regime whereby the legal monopoly of VPC ceases in favour of a new systemallowing authorised CSDs to keep registers of financial instruments, provided the requirements
for authorisation of CSDs are adequate and, in  this connection, the ECB notes the functions of
the Swedish Financial Supervisory Aut hority (Chapter 2 of the New Act).
6. In comparison with the regulation of the Shar e Account Act, the ECB notes the more flexible
regime of the New Act in relation to securities registration, which provides a greater scope fordecentralised arrangements. To the extent that  such an approach may promote developments
towards increased efficiency and safety, and is subject to appropriate authorisation measures,
the ECB would generally welcome the reform, including the option provided for CSDs in
respect of the use of Share Account Institutions as well as the possibility for Sveriges Riksbank,and other national central banks, to act as Sh are Account Institutions where such are used.
7. The ECB also notes and approv es of the widening of the sc ope of the New Act whereby the
registration of foreign paper-based financial instruments will be allowed. Such a possibility
may prove useful in relation to inter alia a futu re Swedish participation in EMU considering the
ESCBs envisaged requirements for the use of co llateral and the possible issue of ESCB debt
certificates for monetary policy purposes.
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8. The ECB finds the rules of the New Act concer ning the legal effect of registration to be
generally clear and notes the principle whereby re gistration is the relevant act for a transfer of
ownership of securities to becomes effective vis-a-vis third parties (Chapter 6 of the New Act;compare also the recently adopted EC Directive of the European Parliament and of the Council
on Settlement Finality in Payment and Securities Settlement Systems and, in particular, Article9.2 of the Directive). In this connection, the EC B also notes the legal provisions related to
securities transactions involving insolvent parties contained in Section 4 of Chapter 6 of the
New Act and understands these provisions to provide protection for a bona fide acquiror of
securities from the point in time of registration.
9. Finally, the ECB appreciates that the legisla tive proposal will facilitate the creation of links
between CSDs in different countries, which is  an important aspect of the desired future
infrastructure in relation to the cross-border use of securities.
10. The ECB has no objection to this opinion being made public.
10 June 1998